Comment by William Mwanza, tralac Researcher
THE THIRD International Conference on Financing for Development (FfD) will be held in Addis Ababa, Ethiopia, from 13 to 16 July, under the theme “Time for Global Action”. The theme of the Conference reflects how it is a defining moment for countries across the globe, in their quest for economic cooperation that guarantees inclusive and sustainable development on a universal scale. The commitments and outcomes of this Conference will be extremely pertinent for the prospects of the post-2015 agenda on Sustainable Development Goals (SDGs) to be adopted in September. It will also have implications for the outcomes of the climate change COP 21 meeting and the 10th WTO Ministerial meeting to be held in Paris and Nairobi, respectively, in December.
As preparations for the Conference continue, it is important to recap on the course of global cooperation on financing for development thus far, Africa’s involvement in the process, and the state of the global economy as the Conference is being held.
The first International Conference was held in Monterrey, Mexico, in 2002. It was a landmark event that signalled a new approach to development cooperation on key financial and related issues by the international community. Out of this meeting came the Monterrey Consensus, a global agreement in which developed and developing countries acknowledged their responsibilities and agreed to cooperate in the following areas:
• Mobilizing domestic financial resources for development
• Mobilizing international resources for development through foreign direct investment and other private flows
• International trade as an engine for development
• Increasing international financial and technical cooperation for development
• External debt
• Enhancing coherence and consistency of the international monetary, financial and trading systems in support of development
The second International Conference on Financing for Development was held in Doha, Qatar, in 2008. The Conference reaffirmed the goals and commitments of the Monterrey Consensus and resolved to take concrete action to implement them. It was held at a time of new and emerging challenges to the financing for development agenda, namely the global financial and economic crisis (or ‘the Great Recession’); volatile energy and commodity prices and increased food insecurity; increased damage to the Earth’s environment and additional costs of climate change mitigation and adaptation; a lack of results in multilateral trade negotiations and a loss of confidence in the international economic system. The six areas of cooperation of the Monterrey Consensus were hence reviewed within this evolving context.
Preparations for the Third Conference have been ongoing within the 69th session of the United Nations General Assembly through substantive inter-Governmental sessions and informal hearings with civil society and the business sector between September 2014 and March 2015. There have also been drafting sessions on the outcome document in January, April and June, 2015. Three additional sessions were also held between May and June, prior to the third and final drafting session.
African countries have taken a common and streamlined approach in their engagement in the FfD negotiations process. This has been on the basis of the Common African Position (CAP) on the Post-2015 development agenda discussed in more detail in an earlier discussion note (click here to read on tralac’s website), and on the African Union Agenda 2063. ‘Financing and partnerships’ is notably one of the main pillars of the CAP. Within the CAP and in broader continental initiatives such as the prospective Continental Free Trade Area, structural economic transformation has been given top priority. The need for investment in infrastructure to enable such structural transformation through more dynamic production and trade networks has been fully emphasised. In spite of the large financing gap that exists, there have been some positive developments on the global front as also discussed in an earlier discussion note (click here to read on tralac’s website). The outcome on this aspect at the upcoming Conference will be important for the setting of an efficient infrastructural network across the continent. This would then form a firm basis for sustainable and inclusive growth and human development, not least through innovation, technology transfer and research and development, as envisaged in the CAP.
The African continent’s approach to the FfD process and its prospects as the next growth pole in the global economy looks promising. It is important to note, however, that while there has been progress on some fronts since the last Conference in 2008 – such as the successful adoption of the Bali Package in the WTO and commitment made at COP 20 towards conclusion of a climate change agreement in December – there remain some persistent risks on other fronts. Although there has been general recovery from the Great Recession by most developed countries, the European Union (EU) is currently facing unprecedented challenges in its integration process. Greece has become the first developed country to default on its repayment obligations to the International Monetary Fund, and is about to hold a referendum on repayment terms to its creditors, which could entail its exit from the Eurozone. The risks of contagion from such a scenario have been downplayed, with suggestions that the reform process that has been undertaken since 2008 puts the continent on a much stronger footing to avoid such an effect. Although the risks to other smaller European countries are being downplayed, there has recently been an indication from one of the larger economies – the United Kingdom – that it will hold a referendum on its continued membership of the EU in 2017. It is not immediately clear what the effects would be if the UK were indeed to exit. Although growth in China continued on an upward trajectory during the Great Recession to the benefit of the global economy, it has since slowed amid concerns on overproduction in certain sectors and the sustainability of its private debt. A continued slowdown of the Chinese economy presents risks for a further global slowdown. Along with the slowdown in China, a slump in oil prices in the first half of 2015 – illustrating continued volatility in the energy market – has shown the precarious position that natural-resource dependent countries find themselves in.
Taken together, these challenges in the international financial and economic system pose significant risks to prospects for public and private financing of development. The commitments that will be made at the upcoming Conference in the midst of them will be instructive for the phase of global economic cooperation that is now being entered.
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