European NGOs Consensus Paper
on Financing for Development

This paper presents key proposals that need to be implemented to ensure a meaningful outcome of the Financing for Development process.

We strongly agree with the FfD facilitator's assertion in his Draft Outcome Document of October 2001 that "reversing the increasing polarization between the haves and have-nots is the pre-eminent moral and humanitarian challenge of our age." The current neo-liberal development model has failed to deliver on its promises of wealth for all and economic justice but has, in fact, increased the gap between the rich and the poor, with particularly devastating effects on women and children -in poverty. We are of the conviction that a sustainable solution to this gross inequity is the advancement of just global systems. The foundation of a new paradigm must be a human rights approach to development and begin with the implementation of the International Covenant on Economic, Social and Cultural Rights.

The UN’s Millennium Development Goals must be an overarching global priority and the High Level FfD Conference a critical milestone in their achievement. Poverty must be halved by 2015. This will only be achieved if the mobilization of new resources is combined with addressing the systemic problems that sustain inequity.

The FfD process provides a unique opportunity for enhanced and sustained cooperation under UN leadership, across all institutional levels and with the full integration of the experience of civil society. This cooperation must be continued in order to address the complex inter-relationships between the realization of the Millennium Development Goals and the systemic root-causes preventing their achievement, which are discussed in the FfD process.

The outcome of the Financing for Development conference must consist of a set of shared principles, a set of specific initiatives with timetables attached, an on-going process for engagement and dialogue between and among actors, and an effective mechanism for implementation, monitoring and evaluation.

The European NGOs consensus paper on FfD summarises our priorities for the inter-governmental negotiation within the FfD process.*

1. Stabilization of international financial markets

There is an urgent need for regulating the excessive volatility of global financial markets with particular attention to the impact on impoverished populations and marginalized people, most of whom are women and children. The stabilization of international financial markets and of the volume of international capital flows, as well as regulatory standards in developing countries’ financial markets that reduce the vulnerability from exposure to foreign interest, are the prime conditions for enabling national long-term development planning.

Preventing financial crises involves reforms that extent beyond domestic financial institutions and regulatory frameworks. We demand governments to give a full mandate to the United Nations to explore possibilities of establishing an international currency transaction tax (CTT) in order to stabilize global financial markets, thus generating the base for sustainable development. Priority should be given to devising viable mechanisms for the taxing of currency transactions domestically, within the context of an international agreement.

We regard the establishment of a currency transaction tax primarily as a fundamental and systemic tool in the stabilization of international financial markets. However, it has a concomitant effect on the generation of revenues which needs to be addressed in the frame of financing for development. We ask governments to give a mandate to the United Nations to explore, in collaboration with other relevant international institutions, possibilities to establish an international framework on redistributive measures for currency transaction taxes collected domestically. The mandate should include the elaboration of methods to be used regarding application, monitoring, possible sanctions, and issue areas eligible for tax spending and redistribution. We regard any tax redistribution measures as new resources for international development that are additional to exisiting ODA budgets.

Cooperation for the stabilization of international financial markets must be further enhanced in the field of orderly rule-based international financial relations. We demand governments to start a negotiation process at UN level for a comprehensive convention against corruption, including cooperation to eliminate money laundering, illegal transactions and the repatriation of illegal transferred funds.

2. Increasing aid levels and agreeing a binding timetable for reaching the UN target of 0.7 percent GNP for ODA

Official Development Assistance is critical to the achievement of the Millennium Development Goals and the realization of people’s basic rights, especially education, health and access to safe water. The Zedillo Report estimates the costs of achieving the 2015 MDGs to be in the order of an extra 50 billion USD per year. However, world aid is at its lowest ever level with an everage 0.22% of GNP, less than a third of the internationally agreed target. There is an unacceptable gap between the ambitious objectives of poverty reduction to which donor governments have committed and the level of aid. Donors must mobilise substantial additional resources. It is time to transform the long-standing 0.7% commitment into a time-bound goal. We call on donor governments to honour their international development commitments by announcing significant, immediate increases in aid and by agreeing a timetable for meeting the 0.7% GNP target.

3. Improving the quality and effectiveness of aid for poverty reduction

Donor governments must ensure that the highest levels of aid go to the poorest countries and that aid is targeted so that it contributes to the achievement of the MDGs and is focussed in developing human resources potential and improving the lives of poor people through, in particular, ensuring access to education, health care and safe water. They must ensure that aid expenditure follows the priorities of citizens and governments in beneficiary countries. They must eliminate all forms of tied aid and increase the proportion of goods, services and expertise sources in the recipient or other developing countries. Donor governments should provide capacity building support that corresponds to recipients’ needs and absorption capacities and increase their level of coordination. We call on donor governments to announce concrete commitments to boost the effectiveness of aid at the Financing for Development Conference.

4. A human development approach in measuring external debt sustainability

The enhanced Heavily Indebted Poor Country (HIPC) Initiative is failing to meet its objective to achieve external debt sustainability, due to inappropriate criteria in its assessment. We demand from governments the revision of the current criteria and the adoption of a human development approach in measuring external debt sustainability. Debt sustainability must be measured in terms of the short to medium sustainability of government finances needed to fund poverty reduction programmes and to achieve the Millennium Development Goals. Only when these programmes have been fully funded, should any residual resources be assigned for external debt servicing. For most least developed countries this would imply full debt cancellation.

We will judge the seriousness of the creditor and donor communities about achieving the Millennium Development Goals on the basis of a FfD outcome document clearly indicating an approach to debt sustainability going beyond the enhanced HIPC framework, opening an international debt reduction policy to other, non-HIPC countries according to their respective poverty needs and external debt situation. This will imply increased transfer of resources, including from reserves of the World Bank and the International Monetary Fund, through substantial additional debt reduction and ODA flows for a wider group of countries.

5. A fair and transparent debt arbitration procedure

Creditors have an unbalanced weight in decision making processes underpinning the current international management of debt crises, and undue control over the pace, volume and eligibility of debt write-offs. To overcome this structurally and ethically unacceptable asymmetry in the decision-making over debt relief, we demand governments to agree on the establishment of a fair and transparent arbitration process for indebted countries. A fair and transparent arbitration procedure must be based on a neutral decision making body, to be established on an ad hoc basis; on the right of all stakeholders and particularly civil society representatives of the affected countries to be heard; on the protection of the debtors basic needs; and the institution of an automatic stay of debt servicing once an arbitration procedure is opened. Such a procedure is also helping in preventing debt crises since it reduces future irresponsible lending and borrowing by both the private and the public sectors. The seriousness of the FfD conference about private sector participation in the achievement of the Millennium Development Goals must be judged, in the first place, by measures to make the private sector more responsible in debt work outs. A single comprehensive framework for debt negotiations is the most efficient way to achieve this.

6. Trade and foreign investment for sustainable development

Trade and foreign investments can substantially contribute to sustainable development and poverty reduction if they enhance domestic productive capacities, provide for food security, create socially sustainable jobs and generate revenues for public investment in social programs. Simply removing trade and investment barriers cannot be regarded as a contribution to development and poverty reduction. We demand governments to assure that any trade and investment liberalization is firmly anchored in the observance of the Millennium Development Goals, and includes the mechanisms necessary to ensure that these goals are met. Developed countries must increasingly assume the financial responsibilities for meeting the adjustment costs of trade and investment liberalization in developing countries, should these decide to pursue such policy. We urge governments to refrain in the FfD process from linking public development assistance to commitments to further trade and investment liberalization. We also urge governments to assure transparent, democratic and participatory decision-making in the relevant international and inter-governmental institutions.

7. International cooperation on tax matters

Tax evasion and avoidance by foreign investors as well as a race to the bottom in taxing foreign investors for attracting investments by developing countries governments are a serious impediment for achieving the Millennium Development Goals. We demand governments to give a mandate to the United Nations to explore, in collaboration with the relevant institutions, possibilities of strengthening international tax cooperation under the aegis of the United Nations. Governments of developing countries must be fully involved in the agenda setting of such endeavour.

8. Participation in economic global governance and monitoring the achievement of the Millennium Development Goals

Democratic control of the international financial institutions and their consistent transparency vis-à-vis civil society organisations is required as well as adequate representation and participation of all states, especially of developing countries, in the decision-making governing bodies of the international financial institutions. We demand governments to secure that economic and financial decision-making powers are transferred away from ad-hoc groups and forums with a limited membership towards bodies that have clearly defined intergovernmental mandates and fully inclusive, participatory decisions-making processes.

International economic and financial institutions must be able to ensure that their policies are coherent with the goal of achieving the Millennium Development Goals and the international body of human rights law. To this end, we demand governments to ensure the mandate and the capacity of the specialized UN agencies to carry out, in due time and fully including the experience of civil society organizations, comprehensive social, environmental and gender impact assessments of the policies and operations of the international financial institutions, especially the World Bank, the International Monetary Fund and the World Trade Organization.

FOLLOW-UP: STAYING ENGAGED

We strongly support the suggestion presented by the FfD Facilitator in October 2001 to ensure an ongoing and comprehensive follow-up process to the International High Level Conference on Financing for Development which provides an effective means for increased cooperation between the Bretton Woods Institutions and the UN and its agencies, in order to guarantee the implementation of the results of the Conference. We ask the Secretary-General of the United Nations, as well as the international agencies taking part in the FfD process, to yearly inform the ECOSOC on the steps they have taken to carry out the decisions of the Monterrey resolution. The actors involved in the FfD process shall meet, at latest, in 2005 to assess the implementation of the Monterrey resolution, rededicating the existing United Nation's high level development dialogue as a Forum for the highest economic authorities, open to all public and private stakeholders associated with the Monterrey Conference.

We demand governments to express themselves in favor of follow-up proposals that give the UN a permanent role in the coordination of the international financial institutions as long as no other comprehensive and more democratic mechanism for the governance of the global economy has been decided upon.

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* Coordinating efforts of European based NGOs on the FfD process include more then 40 NGOs from 13 countries, including 10 networks and 7 national FfD coordinations (status: December 2001)