Innovative Financing for Development. International meeting in Abuja

On 17 January 2014, Nigeria organizes the 12th session of the Leading Group on Innovative Financing for Development.

The French delegation will be led by Deputy Minister for Development Pascal Canfin.

This platform - which brings together 64 countries, international and non-governmental organizations - encourages innovative financing for development and implementation of pilot projects.

The Abuja meeting is an opportunity to discuss the role of innovative financing in the development agenda of the United Nations for the period after 2015, and an update on funding for climate, in the context of the 21st conference of the Parties to the Framework Convention of the United Nations on climate change, we will arrange to Paris in 2015.

Current status of innovative financing

- On 7 and 8 October 2013, the sixth high-level dialogue on Financing for Development was held at UN Headquarters.

The goal of this dialogue was to continue the follow up of the implementation of the Monterrey and Doha Conferences. It also provided food for thought on the financing of the post-2015 development framework.

On this occasion, France presented its position on the financing for development. While emphasizing the key role of official development assistance (ODA), it called for expanding the circle of donors. It also stressed the importance of improving the mobilization of domestic resource, called for a greater involvement of private actors and emphasized the importance of a more effective cooperation, on the basis of the Busan Global Partnership principles.

France also recalled the potential of innovative financing to mobilize additional resources for official development assistance. It called on States to use the different tools discussed in many fora, in particular in the Leading Group on Innovative Financing for Development, to scale up the implementation of these mechanisms.

- On 24 September 2013, the “Leading Group on innovative financing for development” and the United Nations Development Program (UNDP) jointly organized a side event on innovative financing in the margins of the General Assembly. Created in 2006, the “Leading Group” chaired by Nigeria and to which France is the Permanent Secretary, is the main body for discussing innovative financing.

The meeting, entitled “Innovative financing for development: what role in the means of implementation of the post-2015 Development Agenda?” was co-chaired by Mr. Philippe Douste-Blazy, UN Under-Secretary-General on Innovative Financing for Development and Mr. Bachir Yuguda, Interim Minister for National Planning of Nigeria. It allowed to present the different tools for innovative financing discussed in different bodies and particularly in “the Leading Group”, and called for their scaling-up, as a complement of official development assistance.

Mr. Pascal Canfin, Minister Delegate for Development, attached to the Minister of Foreign Affairs, shared the constant commitment of France for the implementation of these tools and presented the most recent initiatives on the matter.

- On 1 March 2013, Nigeria took over the presidency of the Leading Group on Innovative Financing for Development from Finland. The priorities identified by Shamsuddeen Usman, Nigerian Minister/Deputy Chairman, National Planning Commission, are described in the Presidency Statement.

- On 6 February 2013, the Leading Group on Innovative Financing for Development held its 11th plenary session in Helsinki, bringing the work carried out under Finnish presidency to a close. This session focused on 4 themes: 1) the conceptualization of innovative financing and its relationship to ODA; 2) the evaluation and review of innovative financing in terms of its cost-effectiveness, transparency, efficiency and the effectiveness of its allocation; 3) innovative financing for agriculture, food security and nutrition; 4) increased global action to combat illicit financial flows, corruption and tax havens. The program, summary and statements issued by participants are available on the Leading Group’s website.

- On 25 September 2012, President Hollande argued in favor of a tax on financial transactions at the opening debate of the General Assembly :
"We will not achieve the Millennium Development Goals without new resources. We are all aware of our respective nations’ budgetary constraints. That’s why, here at this UN forum, I am issuing a call for innovative financing. It would give our organizations the resources to effectively fight diseases — HIV-AIDS, malaria etc. Now we must take the next step, which I propose: establishing a financial transaction tax, to which several European countries have already agreed, so that capital movements can be reined in or, if they are not, can – through this tax – finance development and fight threats to public health. France has created such a tax. France has even made another commitment: to earmark at least 10% of this tax for development and for fighting public health threats and pandemics.”

- On October 11 2012, the Permanent Secretariat of the Leading Group partnered with a group of Japanese NGOs, the “ NGO Forum for International Solidarity Levies ,” on 11 October in Tokyo in order to organize a high-level side event at the IMF and World Bank Annual Meetings. This event brought together experts and representatives of international organizations and civil society and allowed exchanges to take place on the inclusion of the issue of financing for development in the discussions on the global economic outlook and efforts to resolve the crisis. Please refer to the concept note for the event.

Innovative financing

A. Origin

The international community made a commitment at the Millennium Summit in 2000 to achieve the Millennium Development Goals (MDGs) by 2015. Official Development Assistance remains essential but it will not in itself be sufficient to address this major challenge. Traditional Official Development Assistance must therefore be supplemented by new instruments. Furthermore, Official Development Assistance, despite the criteria defined in Accra on aid effectiveness, remains dependent on changing national political and budgetary imperatives which can make it volatile and unpredictable.

Innovative mechanisms were created in order to respond to these two challenges. The notion of innovative financing for development was introduced into international debates at the Monterrey Summit in 2002. The first mechanisms were actually implemented in 2006 (IFFIm and UNITAID), the same year that the Leading Group on Innovative Financing for Development was created.

Innovative financing is viewed as being complementary to Official Development Assistance due to its predictability and stability. It is closely linked to the notion of global public goods and is also aimed at correcting the negative effects of globalization. It’s not just the nature of this new funding that distinguishes it, but how it is used. Indeed, the funding is managed in a transparent manner, the primary objective being to ensure its most efficient use. To that end, the programs are very often chosen on the basis of local demands and are effectively managed through partnerships involving the public sector, NGOs, international organizations and the private sector.

B. Mechanisms

Innovative financing can be based on various types of mechanisms:

i) Levies on globalized activities subject to zero or low tax

These are taxes that are imposed at the national level but whose use is subject to international coordination. The tax on financial transactions (see below), the global tax on foreign currency exchanges and the tax on airline tickets can be included in this category.

Tax on financial transactions |]

The notion of a tax on financial transactions (TFT) – initially proposed by James Tobin in 1972 as part of a strategy to reduce speculation – has gathered considerable momentum in international debates over the last two years, particularly in the G20 forum under French presidency. France, which leads the way in promoting innovative financing for development, calls for the implantation of a global tax on financial transactions for development.

A TFT was introduced in France on 1 August 2012, and applies to transactions in shares of publicly quoted French companies with a maximum stock exchange capitalization of €1 billion (0.2%), as well as to high frequency trading operations and insurance contracts offering protection against government default risks (0.02%).

Given the failure of the 27 states to reach an agreement on the European TFT project, a group of 11 European states (Germany, France, Spain, Italy, Belgium, Portugal, Greece, Austria, Estonia, Slovenia, and Slovakia) was established with the aim of adopting a TFT through strengthened cooperation. This project was endorsed by the Ecofin Council on 22 January 2013. The Commission’s new proposal is currently under discussion, with a view toward adoption by 1 January 2014. France is mobilizing its efforts to ensure that a share of the revenue from this European tax is allocated to development.

Results: A total of €256 million was raised thanks to this instrument between August 2012 and March 2013. President Hollande pledged to ensure that at least 10% of the revenue from French tax is earmarked for development. Two priorities were identified: the environment (combating climate change) and health (combating major pandemics). In accordance with the draft budget bill for 2013, funding will be progressively allocated to development (€60 million in 2013, €100 million in 2014 and €160 million in 2015), increasing to an average annual commitment level of 10% of total revenue for the period 2013-2015. This amount will be allocated to the solidarity fund for development (FSD) managed by the French Development Agency (AFD), which also receives revenue from the solidarity tax on airline tickets.

ii) Pre-financing mechanisms based on financial markets

These mechanisms include arrangements that influence the allocation of resources over time or provide economic incentives. The International Finance Facility for Immunization and the Advance Market Commitments for vaccines fall within this category.

iii) Mechanisms aimed at leveraging private capital flows

These mechanisms encourage “civic-minded” contributions from individuals and businesses. They may involve providing tax incentives for voluntary contributions or reducing the cost of transferring migrants’ remittances.

iv) Debt management mechanisms

These mechanisms are aimed at helping to increase investment in the development of recipient countries through debt conversion arrangements. The Debt2Health mechanism for example is based on a partnership between two countries (a donor and a partner country): the donor country cancels the partner country’s debt on the condition that the money is reinvested in a project focusing on the development of healthcare infrastructure in the partner country through the Global Fund to Fight AIDS, Tuberculosis and Malaria.

v) Market-based mechanisms

These mechanisms are used to reallocate market-generated revenue to development projects. Carbon auction mechanisms, for example, which have already been introduced in Germany, reallocate part of the revenue from the European carbon emissions quota auctioning system to climate change adaptation projects.

vi) Other resources

Other types of mechanisms are being considered. The idea of a global lottery, or humanitarian lottery, for example, has frequently been put forward in various international forums, notably at the UN since 1972.

Innovative financing at the United Nations

A - Introduction and evolution of the concept at the United Nations

The notion of “innovative financing” was first introduced into international debates at the Monterrey summit in 2002 in order to identify mechanisms capable of generating resources that are complementary to Official Development Assistance and are more reliable.

In January 2004, in Geneva, the presidents of Brazil, Chile, Spain and France (“the Quadripartite Group”) launched - with the support of the UN Secretary-General - an initiative aimed at combating hunger and poverty which led to the adoption of the New York Declaration of 20 September 2004, which recognized the need “to give further attention to innovative mechanisms of financing in order to raise funds urgently needed to help meet the MDGs.”

[The final declaration of the Doha Conference in December 2008 also mentions innovative financing by welcoming “the considerable progress made since the Monterrey Conference in voluntary innovative sources of financing for development and innovative programs linked to them,” and by encouraging “the scaling up and the implementation of innovative sources of finance initiatives.”

In 2012, in paragraph 267 of the final declaration of the Rio+20 Conference, the states recognized “the considerable progress in innovative sources of financing for development,” and called for “a scaling-up of present initiatives, where appropriate.”

B - Actors within the United Nations

i) The Secretary-General’s Special Advisor on Innovative Financing

On 19 February 2008, UN Secretary-General appointed Philippe Douste-Blazy as UN Under-Secretary-General and Special Advisor on Innovative Financing, tasked with promoting new sources of financing with a view toward implementing the MDGs.

ii) The Financing for Development Office

Within the United Nations Department of Economic and Social Affairs (DESA), the Financing for Development Office (FFDO) is responsible for the follow-up to the Monterrey Conference as well as efforts to promote innovative mechanisms of financing for development.

iii) The Intergovernmental Committee of experts on Sustainable Development Financing

Pursuant to paragraph 255 of the Outcome Document of the United Nations Conference on Sustainable Development (Rio, 20 – 22 June 2012), the General Assembly, in its decision 67/ 559, established an Intergovernmental Committee of experts on Sustainable Development Financing.
This Committee is made up of thirty experts, appointed by the five regional groups of the United Nations. It has the mandate “to assess financing needs, consider the effectiveness, consistency and synergies of existing instruments and frameworks, and evaluate additional initiatives, with a view to preparing a report proposing options on an effective sustainable development financing strategy to facilitate the mobilization of resources and their effective use in achieving sustainable development objectives.” This report, that the Committee should submit in September 2014, will constitute an important contribution to the elaboration of the post-2015 development agenda.
In the Committee, France is represented by Mr. Anthony Requin, head of the Multilateral Affairs and Development Department at the Treasury Directorate General. It will promote in the Committee its positions on financing for development, in particular with regard to Innovative Financing for Development.

C – Resolutions adopted by the General Assembly

The topic of innovative financing is addressed every year at the General Assembly, either in a specific resolution or in a resolution dealing more generally with financing for development.

i) Resolutions specifically devoted to innovative financing

On 20 December 2010, the General Assembly adopted a resolution specifically devoted to “innovative mechanisms of financing for development” in which it reaffirms that “innovative sources of financing can contribute to the achievement of the internationally agreed development goals, including the Millennium Development Goals.”

ii) Resolutions dealing with financing for development

The topic is also mentioned in all resolutions dealing with financing for development adopted every year by the General Assembly. A 2012 resolution, for example, noted “the considerable progress on innovative sources of financing for development achieved to date,” and stressed “the importance of scaling up present initiatives and developing new mechanisms.”

D – UN reports

i) UN Secretary-General’s report on innovative financing

On 1 September 2011, the Secretary-General published his report on “Innovative mechanisms of financing for development”, as mandated by the General Assembly. This report examines the scope and magnitude of innovative financing mechanisms and reviews their potential as well as their contribution to achieving the MDGs.

ii) Innovative financing in the other reports issued by the Secretary-General

Every year, in the run-up to the debate of the General Assembly’s Second Committee, the Secretary-General submits a report on the follow-up to the Monterrey and Doha Conferences dealing with all mechanisms of financing for development, notably innovative financing. In the most recent report, submitted during the 67th session, the Secretary-General welcomed the fact that special attention had been paid to the efficient use of resources generated by innovative financing.

iii) Innovative financing in the reports issued by the Department of Economic and Social Affairs

In 2012, the UN Department of Economic and Social Affairs devoted its annual report on the global economic and social situation (World Economic and Social Survey) to the issue of innovative financing for development.

E – Meetings and special events

i) High-level event at the UN organized by the UNDP, together with the Leading Group on Innovative Financing for Development and the Finnish Ministry for Development

This event, held on 17 December 2012, allowed the UNDP, together with the Leading Group on Innovative Financing for Development (see below) to highlight the need to place greater emphasis on innovative financing at the UN. It also provided an opportunity to reaffirm that it was an essential complement to ODA and that its use shouldn’t be limited to health and education.

ii) Special event on innovative financing for development held during the substantive session of ECOSOC in July 2012

In accordance with resolution 66/191, the ECOSOC president hosted, on the occasion of the substantive session of July 2012, a special event on innovative mechanisms of financing for development. Experts on financing for development as well as certain countries again signaled their interest in innovative mechanisms.

iii) Side event at the UN Conference on Sustainable Development (Rio+20)

This side event on 22 June 2012 was jointly hosted by the Leading Group on Innovative Financing for Development and the UN.

iv) Special Meeting of the UN General Assembly’s Second Committee on the topic of innovative mechanisms for development

This event, held on 13 October 2011 in accordance with OP7 of General Assembly resolution 65/146, provided an opportunity to reaffirm the need to generate new resources for development in an economic climate that isn’t conducive to ODA in the run-up to the deadline for achieving the Millennium Development Goals.

v) Event hosted by the UN Secretary-General on innovative sources of financing for development

This event, which took place on 3 June 2010, notably helped to reaffirm that innovative mechanisms can draw not just on new taxes but also on voluntary solidarity contributions.

3. France’s commitment

France has made the issue of innovative mechanisms of financing one of the priorities of its external development policy and has been involved from the outset in the debate on this issue, notably alongside Spain, Chile and Brazil, through the Quadripartite Group (see above) under the auspices of the UNSG. The Landau report commissioned by President Chirac and published in 2004 is one of the first expert reports on this topic.

At present, France primarily takes action in support of innovative financing through two forums: the Leading Group on Innovative Financing for Development and the G20 under French presidency.

A – France within the “Leading Group on Innovative Financing for Development”

France serves as the Permanent Secretariat of the Leading Group on Innovative Financing for Development. It was established in 2006 and is the main forum for discussing and exchanging best practices in the field of innovative financing. It now brings together 65 northern and southern countries, the main international organizations, NGOs and foundations, and aims to promote innovative financing for development, encourage international mobilization in support of these issues and the development of pilot projects.

B – Progress achieved under the French presidency of the G20

Under the French presidency, which made financing for development one of its priorities, the G20 took official action for the first time to implement innovative financing mechanisms.

Numerous studies were presented at the Cannes summit, including the Bill Gates report on financing for development outlining the various innovative options envisaged (contributions on globalized activities such as financial transactions, Advance Market Commitments, various market-based mechanisms, etc.) as well as their feasibility. In the Cannes Summit Final Declaration, the G20 members pledged to continue the efforts undertaken, and to examine and promote the new mechanisms included in the set of options aimed at complementing traditional Official Development Assistance.

(October 2013)

4. Reference documents

- 25 June 2011 - Ninth Plenary Session - Leading Group on Innovative Financing for Development - Bamako Declaration

- 21 September 2010 - Leading Group -Innovative Financing for Development - Declaration

- 17 May 2010 - Informal event on innovative sources of development finance - UN Concept Note

- 28-29 January 2010 - Declaration of Santiago of the Leading Group on innovative financing for development

6. Useful links

- Consult the Leading Group on innovative financing website

- Consult the file of the French Ministry of Foreign Affairs on innovative financing

- UNITAID website

- IFFIm website

Dernière modification : 16/01/2014

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