Five key facts on Financing for Development
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For positive development outcomes, both developed and developing countries need to ensure the right policy environment to make the best and most effective use of the resources available to them. For developing countries, these potential resources are growing quickly and so the need to effectively capture and use them is vital if the global community is to achieve the post-2015 Sustainable Development Goals. As Ewald Wermuth, ECDPM's new Director, argued at the recent Expert Meeting on Financing for Development in the Hague - Official Development Assistance (ODA) can play a role in catalysing international funds that create these ‘enabling’ regulatory environments in the first place. Its a case of the ‘chicken and the egg’ - we need to consider new approaches to development assistance and aid that allows developing countries to make the best use of resources ‘beyond aid’.
Courtesy of Kaleidos ResearchThe Financing for Development debate in a nutshell As experts on international development and finance from around the world convene in Addis Ababa for the Third UN Financing for Development conference, we bring you 5 key facts you need to know about ‘Financing for Development’: 1. Taxes and other public resources are the largest source of finance for development The European Report on Development shows us that the vast bulk of the funds for development in developing countries comes first and foremost from their own domestic tax revenue, followed by domestic private finance. Want an example? Then think of China, which helped the world meet Millennium Development Goal 1 (halving global poverty by 2015) by targeting poverty at home with domestic public funds and domestic private capital. In particular, the European Report on Development shows us that:
- Domestic public revenues (tax and non-tax revenues) rose nearly three-fold by 272%, from $1,484 billion (bn) in 2002 to $5,523 bn in 2011
- International public finance (net ODA and Other Financial Flows (OOF)) nearly doubled by 114%, from $75 bn in 2002 to $161 bn in 2011
- Private domestic finance (measured as Gross Fixed Capital Formation by the private sector, less FDI) quadrupled by 415%, from $725 bn in 2002 to $3,734 bn in 2011
- Private international finance (net FDI inflows, portfolio equity and bonds, commercial loans and remittances) rose nearly threefold by 297%, from $320 bn in 2002 to $1,269 bn in 2011
Source: Capacity4Dev5. The new development agenda will be universal - it affects us all A new defining feature of the Sustainable Development Goals (SDGs) is the principle of ‘Universality’. This implies that all countries (including those in Europe) need to contribute to and achieve the SDGs. Europe will have to work out how to translate global - and albeit rather general - goals and targets into ambitious, meaningful, fair and context-specific national and regional policies that are relevant and in their strategic interests. We will need a Global Partnership to implement a transformative vision for development with better participation by stakeholders in developing countries and better systems of accountability for everyone in meeting the goals they agree to. For Europe, this also means driving forward reforms to the global economy that will support the mobilisation of finance in developing countries - an improved global trade regime, tax rules and transparency and better management of the global financial system. 2015 will be a major paradigm shift in global governance and international development. Ensuring global common goods like equitable growth, health and gender equality (while combating climate change at the same time) means we are in it together. A modified version of this article was translated into Dutch and published in Oneworld.nl. The views expressed here are those of the authors and not necessarily those of ECDPM.