THE WAR TO SECURE financing to “leave no one behind” in the global development agenda is far from over after developing countries failed to secure concrete commitments from rich countries recently in Ethiopia.
The “Addis Ababa Action Agenda,” the blueprint agreed upon at the Third International Conference on Financing for Development (July 13-16), makes no mention of new resources to fund the investments needed to end poverty by 203.
ODA, estimated at $135 billion a year, provides a fundamental source of financing, especially for the poorest and most fragile countries. And more is needed. Investment needs in infrastructure alone reach up to $1.5 trillion a year in emerging and developing countries.’
Worse still, it falls short of concrete measures to ensure that rich countries abide by their commitments to give at least 0.7 per cent of their gross national income (GNI) as official development assistance (ODA), a target that is already 45 years old.
No new commitments
Instead, donors committed to reversing the decline in aid to the poorest countries, with the European Union committing to increase its aid to least developed countries to 0.2 per cent of GNI by 2030.
“The document is helpful in setting the right framework for action; it sets out key priorities in terms of financing the sustainable development goals but it does not provide new commitments to increase the share of aid allocated to the least developed countries,” said Romilly Greenhill, team leader for development finance at the UK-based Overseas Development Institute.
ODA, estimated at $135 billion a year, provides a fundamental source of financing, especially for the poorest and most fragile countries. And more is needed. Investment needs in infrastructure alone reach up to $1.5 trillion a year in emerging and developing countries.
Development assistance programmes.
The estimated financing gap in the social sectors alone is $84 billion every year, which could easily be met if donors delivered the 0.7 per cent of their GNI as ODA, and emerging providers scaled up their development assistance programmes.
“This money for aid is needed especially by the very poor countries who are emerging from crisis, who do not yet have the ability to mobilise domestic resources through taxation,” said Winnie Byanyima, the executive director of Oxfam International.
Shrinking aid resources means that it will be difficult to lift some 550 million people in the developing world, most of them in sub- Saharan Africa, out of poverty. It also means that it will be hard to save some four million children who continue to die needlessly before the age of five.
But perhaps more importantly, rich countries rejected the proposals for turning the intergovernmental committee of experts into a universal body with equitable participation of developing countries.
Yet this is urgently needed by developing countries to curb illicit financial flows and tax dodging by multinationals operating on the continent, which continue to bleed African countries, denying them much needed domestic revenue to fund their development.
Illicit financial flows
Africa loses at least $50 billion every year and has lost $1 trillion over the past 50 years in illicit financial flows, according to the report of an African Union /Economic Commission for Africa (ECA) high level panels, led by former South African president Thabo Mbeki.
At the Addis conference, the South African chair of the G77 group of developing countries, had earlier proposed some key improvements to the language on the UN committee on tax experts. This included redesigning it as the intergovernmental Committee of Experts on International Co-operation in Tax Matters as well as increasing provision of resources.
But the developed countries — the US, the European Union, Japan and Canada — rejected the proposal from the outset, according to sources privy to the closed door negotiations.
South Africa also proposed that members of the committee be directly nominated by governments through the respective regional groups and be appointed by the UN Economic and Social Council (Ecosoc). They would be drawn from the fields of tax policy and tax administration.
The most important language in this proposal was the invitation to Ecosoc to finalise, no later than its 2016, a special meeting on international co-operation in tax matters.
Intergovernmental tax body
“Developing countries held firm in Addis on the need to set up an intergovernmental tax body that would give them an equal say in how the global rules on taxation are designed. Instead, they are returning home with a weak compromise, meaning rigged rules and tax avoidance will continue to rob the world’s poorest people,” said Ms Byanyima.
The final outcome of the Addis meeting means that the Organisation for Economic Co-operation and Development (OECD) or Club of Rich will continue to be in charge of setting global tax rules, excluding about 80 per cent of the world’s countries.
For instance, developing countries want to use the global tax body to force multinationals to declare publicly the amount of tax they pay and where they pay it; they also want more tax to be paid in countries where companies carry out their economic activities. But the OECD advocates that tax be paid in the countries where headquarters are located.
However, at the same meeting, the rich nations and the OECD announced two parallel tax initiatives: Tax Inspectors Without Borders and the Addis Ababa Tax Initiative, intended to help developing countries bolster domestic revenues by strengthening their tax audit capacities.
Source: The EastAfrican