In the past two decades South Korea has made such vibrant progress that it now counts itself as one of the world’s leading economies. Credit: Anton Strogonoff/CC-BY-2.0

By Thalif Deen
UNITED NATIONS, Aug 27 2015 (IPS)

Back in 1996, when South Korea voluntarily quit the 132-member Group of 77 (G77) – described as the largest single coalition of developing nations — it joined the 34-member Organisation for Economic Cooperation and Development (OECD), long known as the “rich man’s club” based in Paris.

As one of only three countries to leave the G77 for the OECD – the other two being Mexico and Chile – Korea elevated itself from the ranks of developing nations to the privileged industrial world.

Perhaps more significantly, Korea also swapped places at the negotiation table: from an aid recipient to a donor nation.

“To play a greater role in the global community and fulfill its responsibility as one of the important donors, Korea will continue to increase its ODA [official development assistance]." -- Ambassador Choong-Hee Hahn, South Korea’s deputy Permanent Representative to the United Nations
Since then, the Korean government has made a significant contribution to development aid, providing assistance to some 26 developing nations.

Ambassador Choong-Hee Hahn, South Korea’s deputy Permanent Representative to the United Nations, told IPS Korea has selected 26 priority partner countries – out of 130 partner countries – for development assistance.

The countries have been singled out based on their income level, political situation, diplomatic relations with Korea, and economic cooperation potential.

To enhance aid effectiveness, he pointed out, the Korean government provides 70 percent of its Official Development Assistance (ODA) to 26 countries, namely, Ghana, Nigeria, Nepal, East Timor, Laos, Rwanda, Mozambique, Mongolia, Bangladesh, Viet Nam, Bolivia, Solomon Islands, Sri Lanka, Azerbaijan, Ethiopia, Uganda, Uzbekistan, Indonesia, Cameroon, Cambodia, Colombia, DRC, Paraguay, Pakistan, Peru, and the Philippines.

In 2014, Korea’s net ODA amounted to 1.85 billion dollars, ranking 16th in volume among OECD’s Development Assistance Committee (DAC) members.

Korea’s ODA-Gross National Income (GNI) ratio reached 0.13 percent, ranking 23rd among the OECD DAC members.

“To play a greater role in the global community and fulfill its responsibility as one of the important donors, Korea will continue to increase its ODA,” the Korean envoy said.

U.N. Secretary-General Ban Ki-moon, a former foreign minister of South Korea, points out that the international community must make progress on the three pillars of United Nations engagement.

First:  sustainable development. Second: conflict prevention and resolution. And third:  advancing human rights and democracy.

“Korea has unique lessons to share on all three pillars and can be an active catalyst in bringing the world together on these issues,” the U.N. chief said.

He said Korea evolved from a developing to a developed country within the span of a single generation, and successfully hosted the Group of 20 (G20) Summit in 2010.

“The international community is looking to Korea with high expectations,” said Ban praising his home country “for rising from a beneficiary to a donor.”

As it continues to enhance its international profile, Korea is now home to the Global Green Growth Institute and also host to the new secretariat of the Green Climate Fund.

Over the last 20 to 30 years, Korea has made such vibrant economic progress that it is now one of the world’s, if not Asia’s, leading economies, with global brand names such as Samsung, Hyundai, Kia, LG and Daewoo.

Asked about the secret of his country’s economic success, Ambassador Hahn told IPS Korea went through an unprecedented transformation from one of the least developed countries to a member of the OECD within a generation. Such economic success can be explained by several key factors.

First, Korea set ambitious yet realistic goals based on sustainable economic development plans.

He said this was achieved through the implementation of five-year economic development plans in the initial stage, even as Korea has made steady progress from the light industry to heavy industry, then to the service industry.

Second, human capital secured through quality education has been another major factor.

In sync with economic development, he pointed out, mandatory primary and secondary education was phased in.

“The strong will of the Korean people to educate also led to the establishment of high quality higher education infrastructure.”

Third, traits such as diligence, self-help, and cooperation contributed to the improvement in the ownership of the country’s development.

Especially, the concept of ‘Saemaul Undong’, which decisively contributed to poverty eradication and development of rural areas in the 1970s, created systematic cooperation between the central and local governments and motivated local governments and communities to foster leadership and ownership of poverty eradication.

These elements, he said, can be seen as the key characteristics of the Korean rural development model, which continues to be a good role model for developing countries today.

Lastly, securing efficiency and accountability through the establishment of democratic and efficient governance led to successful poverty eradication and democratization.

“I believe inclusive institutions, rule of law, and a healthy civil society played a significant role in progressing towards a democratic and open society that is respectful of justice and human rights, considerate of the vulnerable, and that emphasizes human dignity.”

Asked if North and South Korea will one day join into a single union – as East and West Germany did decades ago – Ambassador Hahn said this year marks the 70th anniversary of the division of Korea.

Just as South Korean President Park Geun-hye repeatedly called for bringing down the barriers dividing the Korean peninsula, “it is our sincere hope that conditions for a peaceful unification of the Korean peninsula are created in the near future, and that the Korean peninsula becomes a foothold to realize a ‘world free from nuclear weapons’,” he stated.

“Based on the Trust-building Process on the Korean Peninsula, we currently make efforts to lay the ground for unification by further developing inter-Korea relations, building confidence and easing tensions in the Korean peninsula,” he declared.

Edited by Kanya D’Almeida

Jomo Kwame Sundaram. Credit: FAO

By Jomo Kwame Sundaram
ROME, Jul 14 2015 (IPS)

The growth in global interdependence poses greater challenges to policy makers on a wide range of issues and for countries at all levels of development.

Yet, the mechanisms and arrangements put in place over the past three decades have not been adequate to the challenges of coherence and coordination of global economic policy making. The recent financial crises have exposed some such gaps and weaknesses.The U.N. was among the very few warning Mexico in 1994 and the East Asian countries in 1997 that excessive liberalisation threatened crisis.

Reforming the international economic governance architecture, through the United Nations system, can address these problems.

Although sometimes seemingly slow, the U.N. has a clear advantage in driving discussion on reform because of its more inclusive and open governance.

Lop-sided influence in the current international financial system is a principal reason why many countries lack confidence in the existing arrangements. Rebuilding confidence in such arrangements will require that all parties feel they have a stake in the reform agenda.

But the U.N. is also suited to drive the discussion because of its long tradition of reliable work on international economic issues.

The United Nations secretariat has developed and maintained an integrated approach to trade, finance and sustainable development, with due attention to equity and social justice issues.

The ongoing ‘secular stagnation’ has again highlighted the interdependence of global economic relations, exposing a series of myths and half-truths about the global economy.

These include the idea that the developing world has become “decoupled” from the developed world; that unregulated financial markets and the new financial instruments have ushered in a new era of “great moderation” and “stability”; and that macroeconomic imbalances — due to decisions made in the household, corporate and financial sectors — are less dangerous than those involving the public sector.

The U.N. secretariat has long doubted such arguments, and warned that any unravelling of global macroeconomic imbalances would be unruly.

Also, persistent asymmetries and biases in global economic relations have particularly hit developing countries, both emerging and least developed.

Not surprisingly, the U.N. Secretariat has also drawn attention to the close links between the financial crisis and the food and energy crises.

A more integrated approach to handling these threats is needed, particularly to alleviate the downside risks for the poorest and most vulnerable communities.

The U.N. Secretariat has a strong track record of identifying systemic threats from unregulated finance, warning against a misplaced faith in self-regulating markets and offering viable solutions to gaps and weaknesses in the international financial system.

Special drawing rights (SDRs), the 0.7 per cent aid target and debt relief, for example, were all conceived within the U.N. system during the 1960s and 1970s.

From the 1980s, the U.N. secretariat – both in New York and Geneva — have consistently warned against the excessive conditionalities attached to multilateral lending, promoted the idea of rules for sovereign debt restructuring, and cautioned that the international financial institutions were moving away from their traditional mandates of guaranteeing financial stability and providing long-term development finance.

During the 1990s, U.N. agencies warned against the dangers to economic stability, particularly in developing countries, from volatile private capital flows and the speculative behaviour associated with unregulated financial markets.

The U.N. was among the very few warning Mexico in 1994 and the East Asian countries in 1997 that excessive liberalisation threatened crisis.

The U.N. system was also almost alone among international institutions to identify growing inequality as a threat to economic, political and social stability, and insisted early on measures for a fairer globalisation.

Many of these concerns culminated in the 2002 Financing for Development Conference in Monterrey, Mexico.

More recently, the U.N. has insisted on the importance of policy space for effective development strategies and particularly on the need for macroeconomic policies to support long-term growth, technological upgrading and diversification.

Some countries have sometimes resisted such work by the U.N. secretariat.

However, the combination of a strong track record and a core secretariat steeped in its tradition of an integrated approach to policy-oriented research places the U.N. secretariat in the best position to advance current discussions to reform the international financial architecture.

Edited by Kitty Stapp

Excerpt:

This little boy was one of hundreds whose schooling was interrupted due to violence in India. Credit: Priyanka Borpujari/IPS

By Thalif Deen
UNITED NATIONS, Jul 13 2015 (IPS)

When international donors pledge millions of dollars either for post-conflict reconstruction or for humanitarian aid, deliveries are rarely on schedule: they are either late, fall far below expectations or not delivered at all.

The under-payment or non-payment of promised aid has affected mostly civilian victims, including war-ravaged women and children in military hotspots such as Gaza, Lebanon, Syria, and most recently Yemen.“We found that on average, donors deliver less than half of what they pledged (47 percent). But, even that percentage might overstate the amount that actually arrives in recovering countries." -- Gregory Adams of Oxfam

But it also extends to earthquake-struck countries such as Haiti and Nepal, and at least three African countries devastated by the Ebola virus.

At an international Ebola recovery conference at the United Nations last week, the governments of Liberia, Sierra Leone and Guinea requested more than 3.2 billion dollars in humanitarian aid to meet their recovery plan budgets. And donors readily pledged to meet the request.

But how much of this will be delivered and when?

At a question and answer press stakeout, Matthew Russell Lee, the hard-driving investigative reporter for Inner City Press (ICP), asked Helen Clark, the Administrator of U.N. Development Programme (UNDP), what steps are being taken to ensure that the announced pledges are in fact paid.

According to Lee, she said UNDP will be contacting the pledgers.

“But will they go public with the non-payers?” he asked, in his blog posting.

Lee told IPS that even amid the troubling lack of follow-through on previous pledges in Haiti, Lebanon, Gaza and Yemen, “it does not seem the UNDP has in place any mechanism for reporting on compliance with the Ebola pledges” announced last week.

“If the U.N. system is going to announce such pledges, they should follow up on them,” he said.

On Yemen, he pointed out, while the Saudi-led coalition has been bombing the country, it seems strange to so profusely praise them for a (conditional) aid pledge, especially but not only one that has yet to be paid.

Gregory Adams, Director of Aid Effectiveness at Oxfam International, which has been closely monitoring aid pledges, told IPS that in advance of the Ebola Recovery Conference held last week, Oxfam looked at three past crises to see how well donors followed through on recovery pledges.

“We found that on average, donors deliver less than half of what they pledged (47 percent). But, even that percentage might overstate the amount that actually arrives in recovering countries,” he said.

For example, in Busan, South Korea in 2011, donors pledged they would be publishing timely, accessible and detailed data on where their aid is going by the end of 2015.

But many donors still don’t publish complete information; information is only available for slightly more than half of overall ODA (Official Development Assistance).

As a consequence, said Adams, once aid reaches a recovery country, it is difficult to know exactly how much actually gets where it is most needed.

This lack of transparency makes it hard for communities to participate in planning and recovery efforts, and to hold donors, governments and service providers accountable for results, he noted.

One of the most important lessons of Ebola was that response and recovery efforts must be centered on community needs and incorporate their feedback, Adams said.

“If people do not know where aid is going, they can’t plan, they can’t provide feedback, and they can’t make sure that aid is working,” he declared.

Even Secretary-General Ban Ki-moon made a special appeal to donors last December when he announced 10 billion dollars in pledges as initial capitalisation for the hefty 100 billion dollar Green Climate Fund (GCF).

Announcing the pledges, he called on “all countries to deliver on their pledges as soon as possible and for more governments to contribute to climate finance.”

Last April, Saudi Arabia announced a 274-million-dollar donation “for humanitarian operations in Yemen” – despite widespread accusations of civilian bombings and violations of international humanitarian law in the ongoing conflict there.

Responding to repeated questions at U.N. press briefings, U.N. spokesperson Stephane Dujarric told reporters last week: “I think it’s right now in the Memorandum of Understanding (MoU) phase between the Saudis and the various U.N. agencies to which the money will be allocated.  That process is ongoing.  We hope it concludes soon.  But those discussions are ongoing.”

He said a lot of the larger donors have standing MOUs with the U.N.

“Obviously, this is… I think my recollection this is probably the first time we’re doing it with Saudi Arabia, but I think it takes a little bit more time, but it makes things a lot clearer in the end.”

Asked if there was a conflict of interest given Saudi Arabia is one of the main belligerents in this conflict, Dujarric said: “I wouldn’t say conflict of interest.  We welcome the generous contributions from the Kingdom of Saudi Arabia and that… we welcome the fact that these contributions will be helped… used by U.N. humanitarian agencies, which are then the… but it… the agencies themselves are then free to use those resources in the way they best see fit to help the Yemeni people.”

Last March, at the third international pledging conference for humanitarian aid to Syria, which was hosted by Kuwait, donors pledged 3.8 billion dollars in humanitarian aid. The three major donors were: the European Commission (EC) and its member states (with a contribution of nearly one billion dollars), the United States (507 million dollars) and Kuwait (500 million dollars).

Several international non-governmental organisations (NGOs) and charities, including the Turkish Humanitarian Relief Foundation, the Qatar Red Crescent Society and the Islamic Charity Organisation of Kuwait, jointly pledged about 500 million dollars.

But, so far, there has been no full accounting of the deliveries.

Oxfam’s Adams told IPS in order to make sure that the three countries affected by Ebola can help their people and communities recover, donors need to:

• publish timely, detailed, and comprehensive information on their aid, consistent with the priorities outlined in the recovery plans of the Governments of Guinea, Liberia and Sierra Leone;
• seek to direct aid through local entities wherever possible, including national and local governments and civil society organisations;
• support strong community engagement and the independent role of civil society in Ebola recovery, so that they can hold donors, governments and service providers accountable for results.

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

Gyan Chandra Acharya, Under-Secretary-General and High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS). Credit: UN Photo/Loey Felipe

By Gyan Chandra Acharya
UNITED NATIONS/ADDIS ABABA, Jul 10 2015 (IPS)

Three years ago the United Nations initiated a conversation on a successor to the Millennium Development Goals (MDGs) and how the global community can lay foundations for an ambitious endeavour to eradicate extreme poverty, protect the planet, reduce vulnerability to shocks and ultimately raise the dignity of all humanity.

This conversation is set to result in the adoption of wide ranging targets by heads of state and government when they meet next September at the U.N. General Assembly.We can only measure our success based on how we support the most vulnerable members of the global community by translating all-encompassing aspirations into concrete and life changing realities on the ground.

This is indeed a noble endeavour, as the new agenda will not only continue with the unfinished business of MDGs, but sets the tone for an integrated and comprehensive approach, whose time has come.

Despite the aspirations of the Post-2015 Development Agenda, it must be recognised that the goals and targets will be fully and effectively realised only if we make them inclusive of all.

We can only measure our success based on how we support the most vulnerable members of the global community by translating all-encompassing aspirations into concrete and life changing realities on the ground.

Adopting the right vision is key, but implementation is what makes all the difference. In Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, the capacity and resources to deal effectively with the intertwined challenges of poverty eradication, inclusive and rapid economic growth and environmental sustainability and structural vulnerability are limited.

They need to show a strong and coherent leadership, and it is equally important that the global community steps up to the plate.

The Third International Conference on Financing for Development (FfD) to be held in a few days in Addis Ababa, Ethiopia, represents a real opportunity to address these challenges.

Holding the FfD Conference before reaching agreement on a development agenda for the next 15 years raises the stakes higher. An ambitious and forward looking FfD outcome will set the tone for the adoption of a holistic, transformative and integrated global development framework, with sustainable development at its centre.

Furthermore, owing to this chronology but also because of the centrality of the means of implementation, commitments contained in the outcome document of the FfD Conference will largely determine the degree to which the world, in particular, the most vulnerable countries, will fulfil the aspirations to end extreme poverty, achieve sustainable economic and social development, protect the planet and build resilience to shocks. The fundamental principle of equity demands that their issues remain at the core of our discourse.

A business-as-usual approach will clearly not be enough. Undertaking the investments needed to steer the most vulnerable countries towards sustainable development will require that traditional sources of finance be scaled up and targeted more clearly.

And access to new forms of development finance should be expanded to provide them with a wider pool of resources. LDCs, LLDCs and SIDS must therefore be extended an additional, preferential, concessional and most favourable support in areas such as market access, finance, technologies, know-how and other resources.

Efficient and effective use of these resources will be equally critical. Currently most of the aid distributed in the world does not go to the poorest countries. As the global community meets in Addis, least developed countries are calling for commitments that would channel the equivalent of at least 50 percent of net overseas development assistance to LDCs by 2030.

The world has not only a moral responsibility to ensure that the most vulnerable are sufficiently supported, but also to track where aid spending is going in a transparent and accountable manner.

LDCS will commit themselves to exhibit stronger national leadership and ownership for inclusive and transformative sustainable development. Their institutions and strategies need to be supported for effective delivery of services.

An increase in resources going into productive sectors and infrastructure will be a game changer for them in the medium term. It also creates a stronger base for domestic resource mobilisation. LDCs are asking that commitments already made by development partners are delivered, along with effective market access for their goods and services and an enhanced share of aid for trade.

Integrating sustainability in their development strategies will help build better resilience. Setting up crisis mitigation and a resilience-building fund for LDCs are key to putting vulnerable countries on a positive course for sustainable development through the next fifteen years. This is urgent as climate change, environmental degradation and external shocks are affecting them disproportionately.

Mutual accountability should clearly inform the next development agenda.

These actions will also ensure universal recognition and a stronger voice and participation for LDCs in global decision-making and norm-setting processes.

They will also restore hope to almost 1 billion people living in the Least Developed Countries and send a message that emancipation from a life of deprivation and moving towards a resilient and dignified future is a true possibility.

It will bring economic and social progress to the far corners of the world that have not yet reaped the equitable benefits of globalisation in a truly transformative manner. These countries have the potential to make powerful contributions to a stable and peaceful global order based on shared prosperity.

Of course, these actions have some costs. But these costs should be considered as investments for a better and stable future, and are largely within the existing means of humanity. Global resolve and clear pathways are required. To everything, there is a season, and a time to every purpose.

This is a time for actions, and we have a purpose worthy of our collective commitment. We have a lot at stake. We must not miss this opportunity staring at us in Addis.

Edited by Kitty Stapp

Excerpt:

Bhumika Muchhala of Third World Network. Credit: UN Photo/Paulo Filgueiras

By Bhumika Muchhala
NEW YORK, Jul 10 2015 (IPS)

The key priorities of the Group of 77 developing countries (G77) remain somewhat aligned around a set of issues that have been present from the beginning of the FfD negotiations in New York.

This set of issues includes a re-commitment to Official Development Assistance (ODA) by developed countries, including the provision that climate finance and biodiversity financing is new and additional to traditional official development assistance (ODA). This language, regrettably, is not present in the current July 7 draft outcome document.In the context of vested geo-political interests and the wide gap between North and South, a strengthened ethos of multilateralism is at its most critical imperative next week in Addis Ababa.

In the final plenary, the tone of the G77 was to remain within the main areas of debate while leaving the majority of the text, whose language has been arrived and agreed upon through arduous negotiations, closed to further negotiation in Addis Ababa. In other words, the entire text should, preferably, not be re-opened to negotiation.

However, the U.S. and Japan were far more aggressive, with Japan stating that it is important to emphasise that nothing is agreed until everything is agreed, and the U.S. making note of “a list” of problem issues, essentially warning Member States that some of the text could be at risk if consensus was not achieved.

The European Union noted that they were not in agreement with the formulation of South-South cooperation and fossil fuel subsidies, in that these sections are “too weak.” The long-standing position of the EU is that more obligations and commitments should be taken on through South-South cooperation and that fossil fuel subsidies should be rationalised with more determination.

Across all U.N. discussions, the issue of South-South cooperation is a centrifugal point. Developing countries routinely clarify that South-South cooperation is a complement, not a substitute, to North-South cooperation and that international development financing commitments are to be met by developed countries taking the lead in the framework of the global partnership for development.

Paragraph 56 in the July 7 text mentions South-South cooperation as having increased importance and different history and particularities, and stresses that “South-South cooperation should be seen as an expression of solidarity among peoples and countries of the South, based on their shared experiences and objectives.

It should continue to be guided by the principles of respect for national sovereignty, national ownership and independence, equality, non-conditionality, non-interference in domestic affairs and mutual benefit.”

Paragraph 57 welcomes the increased contributions of South-South cooperation to poverty eradication and sustainable development and encourages developing countries to voluntarily step up their efforts to strengthen South-South cooperation, and to further improve its development effectiveness in accordance with the provisions of the Nairobi Outcome document of the High Level U.N. Conference on South-South Cooperation.

The U.S. referred to a “list” of issues that, in their view, have not been agreed upon, and which they did not clarify. This list is a potential source of stalemate in Addis Ababa. It could become the foundation for contentious trade-offs and further dilution of an already extremely diluted outcome document.

The danger here is the reopening of hard-won text where there is already some degree of intergovernmental agreement. If developed countries reserve their option to ask for further movement in their favour, across the spectrum of issues ranging from public and private finance, debt and systemic issues, the opening paragraphs and systemic issues, a united G77 defence of FfD for developing countries would be critical.

In the context of vested geo-political interests and the wide gap between North and South, a strengthened ethos of multilateralism is at its most critical imperative next week in Addis Ababa. There is still ample space and prospect for Member States to push for the best possible compromise and outcome in Addis Ababa.

A genuine global partnership for development requires efforts where negotiations are conducted in good faith, without backhanded tactics to manipulate text, and without resorting to undemocratic measures to influence the text.

The very integrity of FfD as an international conference is that it addresses, with the most universal membership available in global governance fora to date, systemic issues in the international architecture for development finance, private finance, capital flows, debt, trade and now this year, technology as well.

The significance of FfD is that it can decide on intergovernmental commitments to deliver concrete and actionable commitments on development finance, as well as generate political momentum for much-needed reforms in the international systemic and structural architecture.

For example, it has the potential to push for reforms on financial regulation, debt sustainability, trade and the international monetary system. The history of political and social change involves a vital role for the international norm setting that can take place through the FfD conference.

As the draft civil society declaration for Addis Ababa states, the level of ambition witnessed in this year’s FfD negotiations is hardly suited to function as the operational MOI for the post-2015 development agenda, which is one of the goals, though not the only one, of this conference.

Even more unfortunately, there is now a serious risk of retrogression from the agreements in the Monterrey Consensus of 2002 and the Doha Declaration of 2008. The countries that historically, and with good reason, have taken on a large part of the responsibility to lead in delivering MOI, have gone to great lengths to shed this responsibility or shift them to others.

The FfD text as of the current draft of July 7 fails to ensure the space to undertake normative and systemic reforms that would enable developing countries to mobilise their own available resources. This combination makes it impossible for countries to generate the requisite resources to deliver a sustainable agenda.

Civil society has expressed its disappointment that save for an explicit decision in Paragraph 123 to establish a Technology Facilitation Mechanism at the U.N. post-2015 Development Summit in order to support the SDGs, the FfD draft outcome document is almost entirely devoid of actionable deliverables.

While not a pledging conference it is deplorable that a conference on financing fails to scale up existing sources and commit new financial resources. This calls into question governments’ commitment to realize a development agenda as expansive and multi-dimensional as the SDGs.

In particular, civil society notes the rejection of a U.N. tax body which would create significant sustainable financing for development through, for example, combating corporate tax dodging in developing countries.

A very low window of opportunity was expected if the FfD outcome document was closed in New York. On this note, it is a positive development that concrete negotiations will carry forth into Addis Ababa next week.

While inevitable friction will ensue across well-established battle-lines, the 3rd FfD conference still has a breath of hope for a better outcome.

Part One can be found here.

Edited by Kitty Stapp

Excerpt:

Courtesy of Philippe Douste-Blazy

By Nora Happel
UNITED NATIONS, Jul 9 2015 (IPS)

Implementation of the ambitious post-2015 development agenda which will be adopted in September 2015 at the United Nations depends to a large extent on funding.

Amidst preparations for the upcoming 3rd International Conference on Financing for Development (FFD) to be held from July 13 to 16, 2015 in Addis Ababa, Ethiopia, discussions centre on “innovative financing mechanisms” as stable and predictable instruments to complement traditional Official Development Assistance (ODA) and fill funding gaps at a time when global growth is flagging and most donor countries are facing increasing budgetary pressure.We must fight against the scandal of a world where 870 million human beings are malnourished, a world where nearly 30 percent of children on the African continent suffer from chronic malnutrition, leading to backwardness at school and a cruel loss of growth.

Conceived in the early 21st century in the context of the adoption of the Millenium Development Goals (MDGs), the idea behind the concept is to “invisibly” raise important amounts of income to correct imbalances and provide funding for the most urgent development needs such as eradication of extreme poverty and the promotion of education and global health. The mechanisms involved range from government taxes to public-private partnerships.

A prominent innovative finance example is the global health initiative UNITAID. UNITAID is funded primarily through a one-dollar solidarity levy on airplane tickets. The income raised is spent on global measures to fight malaria, HIV/AIDS and tuberculosis.

A more recent example is the Financial Transaction Tax (FTT). It is currently seen by governments as both a tool to curb financial speculation and a mechanism to raise considerable revenue – which could be used to finance for development. Ongoing plans on an EU FTT to be implemented in 11 willing EU countries might prove as the next step in innovative finance.

In an interview with IPS, Philippe Douste-Blazy, U.N. Under-Secretary-General in charge of Innovative Financing for Development, chair and founder of UNITAID and former French foreign minister, shares his insights on the FTT and innovative finance mechanisms shortly ahead of the upcoming Conference on Financing for Development and the adoption of the Sustainable Development Goals (SDGs) later this year.

Q: Which role does innovative finance play in the context of the negotiations on the post-2015 development agenda?

A: 2015 is a historic year because three great international conferences will take place which are vital for the future of the world:  the Addis Ababa conference on Development Finance, the General Assembly of the United Nations where the international community will launch the Sustainable Development Goals and the COP21 on climate change in Paris.

In all three cases, the scenario will be the same: a magnificent political agreement but without any financial means to back it up. I want to sound the alarm! If we fail to find innovative financing now, at a time when the world has never had so much money but the gap between rich and poor is constantly widening, the 21st century will end in extreme violence.

Q: Financing for development requires considerable financial resources. Is the FTT a suitable tool to raise the necessary funding compared to other innovative finance tools?

A: Finance is currently one of the least taxed economic sectors. It is absolutely surprising when you know the terrible impact this sector had on international development because of the 2008 economic crisis. Implementing a painless percentage tax on financial transactions could generate hundreds of billions worldwide and as a result, be positively decisive on the fight against extreme poverty, pandemics and climate change.

We are now living in a completely globalised world and those threats are upon every citizen of the world. Globalised activities and exchanges should then contribute to international solidarity. That is what we had in mind with President Chirac and President Lula when we implemented the solidarity tax on plane tickets.

People are travelling more and more, so levying a small portion of the price of their tickets offered the opportunity to improve the access to life-saving treatments all around the globe. FTT follows the same logic. Financial needs are considerable and we need to take the money where it is. Innovative financing tools shouldn’t be positioned as rivals, they should instead be seen as complementary.

Q: UNITAID invests the funds raised by means of global solidarity levies to fight HIV/AIDS, tuberculosis and malaria. What are your results at UNITAID in combating these diseases?

A: First, UNITAID’s investments helped create the market for some key more effective HIV treatments in 2007, by bringing the prices down from 1,500 dollars/year to under 500.

Second, through support to the Global Fund and UNICEF, UNITAID contributed to the delivery of over 437 million of the best antimalarial treatments, helping the global community to reduce deaths by 47 percent since 2000.

Third, a 40 percent price reduction for the cartridges of an important new test for tuberculosis (GeneXpert) was negotiated for 145 countries, along with USAID and the Bill and Melinda Gates Foundation. This has saved over 70 million dollars within two years for the global community and has enabled a significant contribution to the 30 percent annual increase in detection of drug resistant TB cases.

Q: Could you tell me about your planned new project UNITLIFE? What is it about and at what stage are the preparations for this project?

A: We must fight against the scandal of a world where 870 million human beings are malnourished, a world where nearly 30 percent of children on the African continent suffer from chronic malnutrition, leading to backwardness at school and a cruel loss of growth.

Faced with this scourge which decimates generations, destabilises societies and severely penalises nations, notably in Africa, we have the duty to imagine a response combining efficacy and solidarity: this is why we want to launch UNITLIFE.

UNITLIFE is based on a simple principle: allocating to the fight against malnutrition an infinitesimal part of the immense riches created by the use of extractive resources in Africa in such a way that the globalisation of solidarity matches the globalization of the economy. So far six African Heads of State accepted such a principle. As UNITAID is hosted by the WHO, UNITLIFE will be hosted by UNICEF.

Q: How does a future FTT implemented in the 11 European countries need to look in order to be beneficial and effective? How do you assess for instance the examples of the French or Italian FTT?

A: French and Italian FTT are really disappointing. They are not fulfilling the expectations neither in terms of regulation nor about revenues. It seems that French and Italian governments were just concerned by the defence of their financial sectors.

The exemptions that are organised are preventing the tax from touching the most speculative transactions. Derivatives, market makers, intra-day and high frequency trading are not taxable with the two models whereas they’re the most dangerous.

Furthermore, it’s in taxing these instruments that a FTT would levy the most resources. For the same reasons, a European FTT that wouldn’t be applied on foreign shares will be highly disappointing. Instead of being scared of the reaction of financial sectors, the 11 political leaders must show real ambition and design a strong FFT with a broad scope and preventing loopholes.

Q: How can you make sure that a certain percentage of the money raised by the tax will be spent on development?

A: Seventeen percent of the French FTT is already allocated to climate and pandemics. President Hollande said he will allocate a part of the European FTT to the same causes; let’s hope that the portion will be bigger!

[Spanish] Prime Minister Marianno Rajoy also committed to allocate a part of the revenue to international solidarity but so far these are the only declarations we have. It would be really interesting to see the eleven

Heads of State committing together on a joint allocation to international solidarity. Using the FTT revenue to finance multilateral funds like the Global Fund, the World Health Organization  or the Green Fund would be the best way to be sure the money raised is actually spent on development.

And today when I see those tens of thousands of migrants trying to cross the Mediterranean, which is becoming the world’s biggest cemetery, I want to underline that the only solution to massive immigration from poor to rich countries is to provide what we call Global Public Goods (food, potable water, essential medicines, education and sanitation) to every human being.

Edited by Kitty Stapp

Excerpt:

By Jomo Kwame Sundaram
ROME, Jul 8 2015 (IPS)

More than four decades ago, the richer members of the international community committed to deliver at least 0.7 percent of their respective national incomes as official development assistance.

Jomo Kwame Sundaram. Credit: Abdul Ghani Ismail

Sadly, less than half a dozen smaller countries have actually met this goal. Furthermore, ODA disbursements have not been stable, reliable or reflective of need, with continuing doubts about development effectiveness.

ODA declined greatly during the 1990s after the Cold War to 0.22 percent of developed countries’ combined national incomes during 1997-2001, before rising again after 9/11 and the 2002 Monterey Financing for Development conference. However, as governments tightened their fiscal austerity screws, ODA declined between 2010 and 2011 to 0.31 percent.

ODA not enough

Since Monterrey, major additional development financing requirements have been identified. Most importantly, these include Aid for Trade (A4T) as well as financing for climate change mitigation and adaptation consistent with the principle of common, but differentiated responsibility — which came out of the 1992 Rio Earth Summit, and was reaffirmed by the UNFCCC and Kyoto Protocol.

Thanks to the efforts of the Leading Group on Innovative Financing for Development — which now includes 63 governments, as well as international organisations and civil society groups – the world has come some way since the Zedillo Report for the Monterey conference in 2002. It has defined innovative development finance especially to provide global public goods, either by taxing those who have gained most, or by taxing public ‘bads’, such as carbon emissions.Innovation is also needed to effectively align development finance with national development strategies, rather than merely giving lip service to this aspiration of most, if not all developing countries.

Additionality

Unfortunately, there is no agreed definition of innovative development finance. Some innovative proposals involve frontloading or better disbursement, rather than additionality. Sources of finance do not necessarily determine allocation, let alone end use.

For example, although currency transaction or Tobin tax proposals were originally intended to finance development, its recent acceptance in Europe is to supplement national public finances.

The UN’s 2012 World Economic and Social Survey on new development finance discusses various innovations in financing sources, intermediation and disbursement. Ideas include supplementing public sector revenue with the allocation and trading of greenhouse gas (mainly carbon or ‘carbon equivalent’) emissions allowances, airline ticket ‘solidarity levies’, aviation or bunker fuel taxes, carbon taxes, currency transaction taxes, financial transaction taxes and wealth taxes.

A set of new ideas involves special drawing rights (SDRs) issuance, the reallocation of unutilised SDRs and leveraging SDRs to augment investment resources. Other ideas include deploying royalties for natural resource extraction from the global commons for development, e.g. from Antarctica or from beyond ‘exclusive [national] economic zones’.

Meanwhile, Project Red seems to be an idea to extract royalties from branding corporate social responsibility.

Other helpful innovative ideas which do not involve additionality include restructuring financial resource flows such as the International Finance Facility for Immunization (IFFIm), Debt2Health and ‘debt for nature’ swaps.

Similarly, some worthwhile new risk management ideas include advance market commitments for new vaccines, subsidies to drug manufacturers to ensure affordable prices and regionally pooled catastrophe insurance.

Not much so far

Over the last six years, about six billion dollars has been attributed to innovative sources of financing, averaging one billion annually, compared to current annual ODA of over 120 billion dollars — much less than the almost 20 trillion committed by G20 countries to economic recovery (including bail-outs), or even the 1.6 trillion actually used for fiscal stimuli in 2009.

However, some recent proposals promise to raise far more resources for sustainable development. An internationally coordinated carbon tax could raise 250 billion dollars per year, while a small currency transaction tax could raise 40 billion annually.

Regular SDR emissions to keep up with the growth of global liquidity could yield approximately 100 billion dollars annually for international development cooperation. Such emissions would reduce the demand for U.S. Treasury bonds and other liquid assets of preferred currencies.

Additionally, if full capital account liberalisation was no longer promoted by the powerful, there would be less need for self protection (or ‘self insurance’) through accumulation of foreign exchange reserves.

If no longer needed as reserves in the form of easily liquidated foreign exchange assets, these could then be invested for development, addressing both savings and foreign exchange constraints.

Innovative partnerships

Innovation is also needed to effectively align development finance with national development strategies, rather than merely giving lip service to this aspiration of most, if not all developing countries.

This can blaze the way in operationally transforming the inclusive multilateral system to more effectively work with stakeholders on the ground in realising national development strategies.

Many have forgotten that the United Nations has been very successful with the Montréal Protocol to eliminate CFCs. While the reduction of greenhouse gas emissions is much more complicated, this earlier success underscores the continued potential of inclusive multilateralism, especially if there is a shared sense of purpose.

In this regard, the U.N. system is perhaps best placed to work closely with Member States and other stakeholders at the national level to conceive, design and operationalise Green Climate Fund projects.

Edited by Kitty Stapp

Excerpt:

By Tamira Gunzberg
BRUSSELS, Jun 18 2015 (IPS)

My colleagues just got back from Munich, where we held a summit bringing together over 250 young volunteers from across Europe. These youngsters campaigned in the run-up to and at the doorstep of the G7 Summit in Schloss Elmau, as one of the key moments in a year brimming with opportunities to tackle extreme poverty.

It’s inspiring to work with these young activists – their enthusiasm and creativity are humbling. But the other thing about young people is that they don’t let anyone pull the wool over their eyes. Euphemisms don’t stick; skirting the point doesn’t get you very far. They keep us on our toes and that is not a bad thing at all.

Courtesy of Tamira Gunzburg

But some phenomena I am simply at a loss to explain. One such paradox is the fact that only a third of aid goes to the very poorest countries, and that aid to those countries has been declining. Yet in the so-called ‘Least Developed Countries’, 43 percent of the population still lives in extreme poverty, compared to 13 percent in other countries.

This begs so many questions it is dizzying. How are we going to eradicate extreme poverty if we don’t prioritise the countries that need aid the most? What is aid for if not helping the poorest?

Why are we cutting aid to the poorest countries when it is the middle income countries that are becoming more able to mobilise their own sources of financing for development? And why aren’t leaders doing anything to reverse this perverse trend?

Instead, EU development ministers in May recommitted to the existing promise of providing 0.7 percent of national income in aid, and up to 0.2 percent of national income in aid to the least developed countries – this time “within the timeframe” of the post-2015 agenda to be adopted in September.

But even if they achieved both targets by say, 2025, that would still mean a share of only 28.6 percent of total aid going to the poorest countries. In other words: business as usual. This is where any young person would detect the glaring no-brainer, and unapologetically probe “… but isn’t that too little, too late?”Ending extreme poverty by 2030 and leaving no one behind will become harder as we near the zero zone.

Whereas the Millennium Development Goals – global anti-poverty goals agreed in the year 2000 – allowed us to pick the ‘low-hanging fruit’ in terms of bringing down average levels of extreme poverty and child mortality, this year’s new set of ‘Global Goals’ is all about finishing the job.

Ending extreme poverty by 2030 and leaving no one behind will become harder as we near the zero zone. We need to frontload our efforts and put the poorest and most vulnerable at the centre of our approach from the get-go.

That is why donors must commit to spending at least half of their aid on the poorest countries, and to doing this by 2020, so that those countries have time to tackle the Global Goals in time for the 2030 deadline.

This is but one of the debates that are heating up in the final weeks before the Summit in Addis Ababa in July, where world leaders will come together to decide on how to finance development. Negotiations touch upon topics that go well beyond aid, and rightly so, in an attempt to unlock new sources of financing such as domestic resource mobilisation and private sector investment.

Sadly though, many of the discussions are still being held hostage by the impasse on aid commitments. Indeed, donor countries’ laborious reaffirmation of decade-old broken promises does not inspire confidence that they are committed to doing things differently this time.

What, then, can change the game at this point? For one, let’s kick things up a level and bring in the big bosses. We fully expect heads of state to be in attendance in Addis – but even before then, the leaders of all 28 EU Member States are getting together for their own summit at the end of June.

Here they have the authority to agree on a more ambitious commitment than the development ministers managed to broker last month. Announcing an EU-wide intent to direct at least half of collective aid to the least developed countries would send a strong political message that could spark a much-needed race to the top in the final sprint towards Addis.

Another sure way to guarantee the success of this Summit is to inject more political will into the discussions that go beyond aid. For example, several countries are coming together to harness the “Data Revolution” to ensure that we collect the statistics needed to track progress and achieve the new Global Goals.

Right now, the world’s governments do not have more than 70 percent of the data they need to measure progress. Clearly, we need to aim for more with the new Global Goals.

Further, it will be crucial to agree on minimum per capita spending levels on essential services to deliver, by 2020, a basic package for all. In order to fund these efforts, governments should increase domestic revenues towards ambitious revenue-to-GDP targets and halve the gap to those targets by 2020 by implementing fair tax policies, curbing corruption and stemming illicit flows.

The list is long and time is running out, but as our youth activists would unwaveringly note, there is still ample opportunity for leaders in both North and South to rise to the occasion and throw their weight behind ending extreme poverty. Pesky questions aside, leaders really should take note of these young voices, because it is quite literally their future world that leaders are shaping this year.

Edited by Kitty Stapp

Excerpt:

By Wu Hongbo
UNITED NATIONS, Sep 25 2014 (IPS)

Persistent gaps between the promises made, and actually delivered, by developed countries to developing countries, hold back efforts to improve people’s lives and end poverty.

The poorest countries need more access to aid, trade, debt relief, medicines and technologies, if we are going to make greater progress on reaching the Millennium Development Goals (MDGs).

In 2000, the world’s developed countries committed to help developing countries meet the MDGS by 2015 through what became known as the Global Partnership for Development. The targets for the partnership were combined into the eighth Goal (MDG 8).

The promises under goal 8 included providing developing countries with greater access to aid, trade, debt relief, medicines and technologies. This was meant to help the world’s poorest countries make progress on the first seven MDGs.

The idea was that if the targets of Goal 8 were achieved, then developing countries would have strengthened their earnings from trade and eased their sovereign debt difficulties so that—coupled with enhanced aid and appropriate access to essential medicines and new technologies—countries would be in a better position to improve the lives of their citizens.

Over 30 U.N. organisations co-led by the United Nations Department of Economic and Social Affairs (UNDESA) and the United Nations Development Programme (UNDP) have been tracking the fulfillment of these promises in the annual MDG Gap Task Force Report.

Today, the global partnership for development is strong and last year recorded the largest level of official development assistance. But much unfinished business remains as we approach the deadline for the MDGs.

Assistance to the poorest countries remains far below what is needed and what was promised

After two consecutive years of falling volumes, official development assistance (ODA) hit a record high of 135 billion dollars in 2013. Seventeen of 28 donor countries increased their development assistance, and five have met the target of disbursing 0.7 percent of their national income to developing countries. Despite this progress, we are still far behind our target.

A 180-billion-dollar gap remains between the aid delivered and the amounts promised by developed countries. In addition, aid continues to be heavily concentrated with the top 20 recipients receiving more than half of all aid.

Despite a 12.3 percent increase in aid to the 49 least developed countries (LDCs) in 2013, bilateral aid to sub-Saharan Africa fell four percent between 2012 and 2013 to 26.2 billion dollars.

Close the trade gaps

Developed countries must do more to address the negative impacts of non-tariff measures on the ability of developing countries to participate in the global economy. While developed countries continue to lower tariffs and allow the proportion of duty free imports from developing countries to rise, new trade restrictions have been introduced.

We need a final push towards improving market access for developing countries, and continuing efforts to eliminate all agricultural export subsidies, trade-distorting domestic support and protectionist policies that inhibit access to the global economy.

Debt relief promises kept, but new risks arise

Debt relief programmes for Heavily Indebted Poor Countries (HIPC) are coming to a conclusion. Under the HIPC initiative, 35 of 39 eligible countries have reached the completion point as of March 2014 and as a result, debt service burdens have been reduced substantially.

It is encouraging that government spending on poverty reduction in these countries has increased considerably. Nonetheless, some of these countries are again at risk of debt distress and the group known as “small States” is particularly at risk because they often do not qualify for debt relief.

Greater access to essential medicines and technologies needed now

Global action and awareness has enhanced access to affordable essential medicines. However, the stock of medicines in many developing countries remains insufficient and unaffordable.

Developing countries also have more access to some new technologies, especially information and communication technologies. Yet, large gaps remain in access to many new technologies, such as broadband Internet because of the high cost.

The work ahead for the international community has been laid out. Now is the time for the world to seize this opportunity to stand by our promises and deliver on our commitments to eradicate poverty, raise people’s living standards and sustain the environment.

As the deadline for achieving the MDGs approaches and Member States of the United Nations prepare to launch a new sustainable development agenda, we must do our utmost to close the remaining gaps. With little more than one year remaining, now is the time to take action.

Let us all work together—governments, international institutions, all citizens of the globe—to commit to concrete accelerated actions in achieving all MDGs, as well as to a renewed global development cooperation, to underpin our development efforts, so that we can usher in a more sustainable future.

Excerpt:

Developed countries must support more effective mitigation in all countries where emissions are either high or growing. Credit: Cam McGrath/IPS

By Smita Nakhooda
BONN, Germany, Jun 10 2013 (IPS)

Developed countries report that they delivered more than 33 billion dollars in Fast Start Finance (known as FSF), beyond the pledges they made at COP 15 in Copenhagen in 2009. Recent analysis suggests that the funding delivered may have exceeded 38 billion dollars.  But that is not the whole story.

The story behind the headline lies in how this money has been allocated. What has it supported, and how much of it represents new funding to support the additional challenges that climate change poses for development?

My colleagues at ODI in the United Kingdom, the World Resources Institute (WRI) in the United States, the Institute for Global Environmental Strategies (IGES) in Japan, Germanwatch in Germany and Cicero in Norway have analysed our countries’ FSF contributions to try and answer these questions. These countries’ climate finance contributions are among the largest.

In Copenhagen, four years ago, these and other developed countries promised to deliver 30 billion dollars from 2010 to 2012 as Fast Start Finance. This would kick-start the delivery of 100 billion dollars per year by 2020. A substantial share of this finance may flow through the Green Climate Fund, a new mechanism to deliver money to developing countries so they can mitigate and adapt to climate change. Now, what does all this mean in reality?

Climate finance contributions have increased

Our first message is a positive one: finance for climate-related activities in developing countries has increased significantly during the FSF period, despite unprecedented economic difficulties and austerity measures in developed countries brought on by the 2008 financial crisis. Indeed, this trend applies to all of the countries we reviewed. The UK, for example, appears to have increased its climate finance four-fold relative to environment-related spending before the FSF period.

A challenge, however, is that countries counted very different forms of finance, resulting in major differences between the scale and objectives of different contributions.

A large share of Germany’s 1.6-billion-dollar FSF contribution is directed through its International Climate Initiative, which is indirectly financed through revenues from emission trading. With the exception of its 615-million-dollar contribution to the Climate Investment Fund, Germany counts only grants towards its FSF. By contrast, Japan and the United States include as FSF a large share of export credit and development finance for low-carbon infrastructure. In Japan’s case, some efficient fossil fuel options are also counted. Japan has also reported on leveraged private finance in its total.

Many countries also seek FSF “credit” for projects and programmes that they were already supporting prior to the FSF period.

For instance, the United States counts its contribution to the Montreal Protocol Fund, which it has been supporting since the early 1990s, as FSF. A significant share of Japanese FSF was pledged prior to 2010 through initiatives such as the Cool Earth Partnership. All five countries count contributions to the Climate Investment Funds (CIFs) since 2010, although countries pledged to fund the CIFs at a cumulative level of at least 6.1 billion dollars in 2008.

These pledges were made in the context of efforts to scale up climate related finance in the lead up to Copenhagen. But while these are important programmes, for which sustained support is essential, the pledges are not technically “new” during the FSF period.

Of the five countries we studied, only Norway has met the international commitment to deliver 0.7 percent of its gross national income (GNI) as official development assistance (ODA) and can claim that its contribution was additional by this standard during the FSF period (although it has ramped up its domestic ODA commitment to one percent of GNI). Only Germany and Norway have clearly spelled out how they define “new and additional” in their self-reporting on climate finance.

Using climate finance effectively

There has been a strong focus on funding activities that can help developing countries reduce greenhouse gas emissions. This includes financing clean electricity from renewable energy, the use of more efficient technologies, and better public transport systems.

Such programmes can play a vital role in supporting countries to meet their basic infrastructure and energy needs without the emissions. Such finance is essential.

Emissions in many rapidly growing developing countries are rising fast. While they may bear less historical responsibility for climate change, today some of the largest emitters in the world are developing countries. There are abundant opportunities to take more climate compatible approaches to development – but they often pose additional costs or risks. International public finance can help countries seize such opportunities.

But the truth is that we are already feeling the impacts of climate change. These impacts will be particularly severe in poor countries. And global efforts to address climate change so far have been inadequate.

This reinforces the imperative to support more effective mitigation in all countries where emissions are either high or growing. But it also strengthens the case to scale up adaptation finance.

During the FSF period countries committed to scale up adaptation finance. Adaptation finance would focus on the developing countries that are most vulnerable to the impacts of climate change, including Least Developed Countries (LDCs), Small Island Developing States (SIDS), and African countries. About 12 percent of the total FSF contribution of the five countries we studied supported adaptation, with the share ranging from about seven percent in Norway to about 35 percent in the UK and Germany.

In practice, of course, adaptation and mitigation activities may be quite interlinked. Norway, for example, has prioritised efforts to reduce emissions from deforestation and degradation, particularly in tropical forests, which also have adaptation benefits.

Future public support for climate action, however, is highly uncertain. This is a substantial challenge. There is an urgent need for greater clarity on the level of public finance that developing countries can expect from the international community.

The FSF experience reinforces the importance of scaling up finance in order to meet the ever more urgent challenges of climate change. This will require political commitment and leadership at the national level, and enhanced global cooperation.

*This commentary is based on a joint analysis by Smita Nakhooda (ODI), and Taryn Fransen of the World Resources Institute (WRI), reflecting on the FSF experience on the occasion of the 38th sessions of the Subsidiary Body for Implementation and the Subsidiary Body for Scientific and Technological Advice, as well as the second part of the second session of the Ad Hoc Working Group on the Durban Platform for Enhanced Action, taking place from Jun. 3-14, 2013, in Bonn, Germany.

Excerpt:

Japan’s crucial official development assistance (ODA) is declining steadily, even while poverty in Asia continues to rise. Credit: Naimul Haq/IPS

By Suvendrini Kakuchi
TOKYO, May 1 2013 (IPS)

As Japan slips from its former top spot as the world’s biggest donor, experts here are worried about long-term changes in the country’s development assistance programme, which has played a crucial role in global poverty reduction efforts.

Japan’s spending on official aid fell 3.1 percent from the previous year to 10.49 billion dollars in 2012, revealed the latest data published last month by the Organisation for Economic Cooperation and Development (OECD), which placed the country in fifth place on its list of major donors, behind the United States, UK, Germany and France.

The same survey, testing the United Nations recommendation that donors allocate 0.7 percent of their gross national income (GNI) for international assistance, indicated Japan is at 18^th place in the GNI scale, with an allocation of just 0.25 percent on official development assistance (ODA).

Overall, Japanese ODA has dropped 47 percent compared to its peak in 1997, according to the government. The OECD attributes the decline to a “fall in bilateral grants and reduced contributions to international organisations”.

Analysts predict the gloomy trend is here to stay, leading to a strategic shift in how aid is allocated.

“Domestic economic constraints and security threats in East Asia have made national goals the priority in Japan’s ODA budget,” Professor Massaki Ohashi, a veteran ODA analyst, explained to IPS. “This change, from the traditional focus on poverty reduction in recipient countries, is a serious concern for us.”

Head of the Japan NGO Centre for International Cooperation (JANIC), an umbrella civil society organisation, Ohashi says ODA spending will now be directed at shoring up struggling Japanese companies facing competition from cheaper goods manufactured in rising Asian economies.

For instance, signature Japanese telecommunication brands such as Sony and Matsushita (also known as Panasonic) are no longer the household names they once were in Asia or Africa, given the encroachment of cheaper Chinese or South Korean products that are popular with the expanding middle classes on the continent.

In an interview with IPS, Hirokazu Hiratsuka, an economist at the Mizuho Research Institute explained that Japan’s inward-looking ODA policy will be strengthened under the conservative administration of Japanese Prime Minister Shinzo Abe who has made economic revival — under the term “Abenomics” — the leading national goal to counter the rising economic clout of China and South Korea.

Yen loans that support major infrastructure projects comprise more than 50 percent of ODA, but have been decreasing by an average of 16 percent annually. Grants for poverty reduction efforts, which formerly made up 40 percent of Japan’s official assistance budget, are also declining.

The focus now will be on securing Japan’s domestic economic interests. Hiratsuka stressed that Japanese aid will also be directed at developing legal frameworks for free trade agreements (FTAs) in Asia and global business regulations that will allow Japanese companies to exercise greater influence in the region.

A case in point is the Japan-led special economic zone (SEZ) adjacent to the Thilawa port in Myanmar (Burma), scheduled to start this year, which will open the doors for Japanese companies to launch businesses in the resource-rich country. With 70 percent of the zone reserved for manufacturing plants, Japanese conglomerates like Mitsubishi, Sumitomo Corp and Marubeni will be the main participants in the project.

Japanese ODA will be used to boost Yangon’s electricity generation capacity that will supply the SEZ, located 23 kilometers south of the capital.

Currently, Japanese businesses occupy just 0.64 percent of total foreign investment in Myanmar, lagging behind China’s 34 percent and South Korea’s seven percent, according to the Myanmar Federation of Chambers of Commerce and Industry.

Japan has also promised to increase economic assistance to Sri Lanka, in an effort to boost bilateral trade and investment.

A recent government statement highlighted the importance of maritime cooperation between the two countries to protect “stability” in the Indian Ocean, a jab at China’s support for infrastructure development on the island of Sri Lanka, including the construction of a new port in the southern coastal city of Hambantota.

Fighting back the changes in ODA policy, JANIC is lobbying hard for the protection of the Millennium Development Goals (MDGs) in Japanese aid policy, against pending cuts slated for the next fiscal year that started in April.

With poverty in Asia increasing along with economic growth, JANIC is struggling to keep poverty-reduction targets on a list of priorities for ODA, but these pleas may be falling on deaf ears.

The steady decline in development assistance has turned the spotlight on the future of Japan’s most important foreign policy, formulated back in 1945. Compensation payments to former colonies after its defeat in World War II and generous technical assistance to developing countries earned Japan, the richest country in Asia, respect and admiration in recipient nations, helping to bolster its image as a crucial pillar in the post-war global economy.

Now, “the country needs to figure out ways to make contributions that no other country can offer”, according to an editorial in the Nikkei, Japan’s leading economic daily.

Many experts favour the idea of leveraging Japan’s leading edge in science and technology — such as stem cell research, transport and environmental protection – to combat lower aid disbursements.

Professor Takeshi Inogchi, an international relations specialist, told IPS the dip in ODA poses a serious challenge to Japanese influence in developing countries and particularly in Asia where new aid powerhouses like China and South Korea are gaining steam.

“Japan, a resource-poor country, must react quickly to these new challenges. Not being a military player, we need to ensure friends in Asia that can defuse the territorial tensions with China in particular,” he told IPS, referring to clashes between the Japanese and Chinese navies over the Senkaku Islands (known as Diayou in China), an uninhabited archipelago claimed by both sides.

(END)