This week, all eyes are on Addis Ababa as world leaders attempt to agree on a way to finance development for the next 15 years. The United Nations Conference on Trade and Development (UNCTAD) estimated that if the world wants to achieve the Sustainable Development Goals (SDGs), total investment in developing countries needs to be $3.3-4.5 trillion annually. Right now, yearly investment commitments are at only about $1.4 trillion. Just last week, Multilateral Development Banks announced plans to extend over $400 billion in financing for development over the next three years.
In 2002, over 50 heads of state and representatives from the World Bank, IMF, and WTO met at the UN’s Financing for Development Conference in Monterrey, Mexico at a time of “general optimism about the global economy” and a push for international cooperation to achieve the MDGs after international terrorist attacks in 2002. A follow-up conference in Doha in 2008, challenged development partners and host governments to review and improve financing for development systems. Unfortunately, in light of a global economic downturn, the conference had generally disappointing results.
The conversations this week in Addis are occurring in a less optimistic climate than Monterrey. Though world leaders and development practitioners agree that the SDGs are more comprehensive and inclusive than the MDGs, they are also more ambitious. Moreover, attempts to mobilize additional financing for sustainable development are happening against a backdrop of slowing global economic growth and increasing skepticism of institutions and aid.
Fortunately, the development community is looking beyond traditional foreign assistance to a seemingly endless stream of potential non-traditional funding flows for development. Development assistance from states outside the Development Assistance Committee, such as from the BRICS and Arab donors, is on the rise. In 2005, development assistance from non-DAC actors was reported at $4.6 billion, and today, estimates range from $11-41.7 billion. Foreign direct investment (FDI) also represents a potential source of development assistance for developing countries. Since 2002’s Monterrey Consensus, FDI stock from commercial and state-owned banks, multinational companies, private funds and other sources more than quadrupled in least developed countries (LDCs). Other potential income sources for development include domestic resource mobilization, philanthropic aid, public climate finance, and impact investment, among others.
FFD3 is focused on the best way to organize and distribute funding for sustainable development, as well. In the opening session, WTO Director-General Roberto Azevêdo outlined major existing gaps in trade finance that could be preventing increased growth and development at the opening session of FFD3. Later that day, the UN, World Bank, and several partner governments launched the new Global Financing Facility to support health for women, children and adolescents and the SDGs with $12 billion already in place. The next day, at the International Business Forum, Ban Ki-Moon asked CEOs and business leaders to “be our partners in supporting and financing this agenda” in a sustainable way.
Discussions at the UN in preparation for FFD3 indicated the need for a “new social compact” to provide services and support to people in low- and middle-income countries. Increased ODA and FDI, a technology bank to address technology gap for LDCs and more substantial and transparent tax systems for developing countries, are all proposed ways of funding this new social pact. To this end, the OECD and United Nations Development Programme (UNDP) just announced a new initiative called Tax Inspectors Without Borders to build and support tax audit capacity in developing countries. Other new commitments and initiatives coming out of the FFD3 can be viewed here.
The stakes are high for sustainable development, with a increasing number of goals and targets, as well as an growing diversification in the sources of funding low- and middle-income countries can harness for the future. As AidData’s Director of Policy and Communications Samantha Custer reminded us in the latest Deeper Than Data podcast episode, though, “we need to be better stewards of the resources that are available [for sustainable development].” Citizens, governments and development partners cannot monitor progress if information on financing and results is hidden under lock and key. In the excitement of FFD3, it is important to remember the importance of open data for the future. In global development, knowledge is power.
Emily Jackson and Daniel Aboagye are interns with AidData’s Policy and Communications Team, as well as students at the College of William & Mary. Emily is a sophomore studying International Relations and Daniel is a senior studying Public Policy.