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Kaul Et Al - Policy Debate Financing The SDGsGlobal Vs Local Public Goods PDF
Kaul Et Al - Policy Debate Financing The SDGsGlobal Vs Local Public Goods PDF
6.2 | 2015
Articles and Debates 6.2
Electronic version
URL: http://journals.openedition.org/poldev/2068
DOI: 10.4000/poldev.2068
ISBN: 978-2-940503-69-8
ISSN: 1663-9391
Publisher
Institut de hautes études internationales et du développement
Electronic reference
Inge Kaul, Robin Davies, Robert Glasser, Michael Gerber and Luca Etter, « Policy Debate | Financing
the SDGs: Global vs Local Public Goods », International Development Policy | Revue internationale de
politique de développement [Online], 6.2 | 2015, Online since 01 September 2015, connection on 02
August 2018. URL : http://journals.openedition.org/poldev/2068 ; DOI : 10.4000/poldev.2068
Robin Davies. You have argued strongly for a conceptual and practical separation of
Official Development Assistance (ODA) and finance for global public goods. Why?
Inge Kaul. It was quite clearly agreed at the first Rio Summit in 1992 that finance for
global public goods like biodiversity preservation, climate change mitigation and
related activities should be new and additional, and not taken out of ODA. Such finance
constitutes payment for a service, and is not a transfer. It is, I think, most remarkable
that international organisations such as the Global Environment Facility, the World
Bank, the UN Development Programme (UNDP) and the like take ODA money for such
purposes in non-compliance with the international agreements that exist. And the
practice is continuing, now, with the Green Climate Fund.
Indeed, some 24 per cent of ODA is reported to have climate change mitigation or
adaptation as its primary purpose, and many more ODA-funded activities will have one
of these aims as secondary purposes. More generally, we know—thanks to Kunibert
Raffer—that even back in 1999, 33 per cent of ODA was spent on global challenges,
primarily in the areas of global health issues and climate change. How, then, do we
expect to deal with the rising number of failed and failing states? Such countries need a
lot of assistance for conventional development purposes. Why not, therefore, turn to
our environment ministries and health ministries and say, ‘Top up the available ODA
resources so that we can focus those on development and use the additional finance to
deal with global challenges’?
Robin Davies. The typical foreign or development minister will talk about the moral or
humanitarian case for aid but will often, and often much more strongly, press either the
mutual benefit case or the global benefit case. Is there a risk in so firmly separating the
moral case for aid and the common interest case for financing global public goods?
Inge Kaul. In my view, the result would be a strengthening of the rationale for, and
therefore of public support for, the financing of global public goods. As you can see
when you look at how the world reacts to the rise of China, or some of the other
emerging economies, our compassion and our feelings of solidarity go only so far.
Where there is really abject poverty, some of us feel morally concerned and support
aid. But during the last 50-60 years, our compassion has amounted, even in good times,
to not more than 0.3 per cent of our collective income. And the extent to which ODA
money is being siphoned off for ‘non-conventional’ purposes suggests that our
compassion is declining.
If you now try to squeeze global public good expenditure into the ODA envelope, and
even get up as a parliamentarian and brag, ‘Our aid has increased from 0.36 to 0.38 per
cent of GNI’ people will be upset. If we project this as aid—giving something to others
because they are not as well off as we are—people will say: ‘with growing poverty in our
own societies, and with inequity, why don’t you spend that money here?’ So, instead,
tell people that we are spending this money so that their utility increases. They won’t
get skin cancer from the hole in the ozone layer, and the roofs of their houses won’t be
blown away owing to climate change. People don’t want to be exposed to these global
risks. So I think it is very counterproductive from a political point of view—as well as
technically wrong—to conflate aid and finance for global public goods. We are giving
the relatively poor people in our societies the feeling that we give money away while
we can’t afford kindergartens at home.
Robin Davies. It seems difficult in practice always to draw a sharp distinction between
financing development and the production of global public goods. Certain global public
goods require a whole lot of other things that are also important for national development
reasons.
Inge Kaul. Yes, the strengthening of health systems is of course very much in the
national interest of developing countries and should be supported for moral reasons.
But now, in an interdependent world, we also benefit: the more they do, the better for
us. So this provides an argument not only for fulfilling long-standing aid promises, but
for going further. We should provide additional resources, on top of aid, because—for
example—at present we can’t rely on many countries’ disease monitoring and reporting
systems. This would be a global public good top-up. The same is true in connection with
infrastructure development. If there are incremental costs involved in proofing an
investment against climate change, then you can’t expect a country to take a normal
infrastructure loan. There should be a subsidy to cover the incremental cost.
Robin Davies. If a government actually has two financing lines, an ODA line and a global
public goods line, there is a significant decision to be made about the allocation of available
resources between the two lines. The average OECD donor’s ODA/GNI ratio currently
stands at 0.29 per cent and in most countries there isn’t the political space to move quickly,
if at all, towards higher ratios. So, in the immediate future, how do governments decide how
much of their international public finance goes into the ODA line, and how much into the
global public goods line?
Inge Kaul. Very simply. You have a budget with budget lines. So whatever you have for
aid—0.29 per cent of GNI or whatever it is—goes into the ODA line. And then you have,
say, a ministry for the environment. And among the budget lines for that ministry
there might be one for allocations to the Green Climate Fund or for other such climate
finance mechanisms. In the health budget, you have something similar, and likewise in
the transport budget, the judicial budget, and so on.
By means of this dual track budgeting we would tie our own hands a little bit by
indicating at the appropriation stage how much money is to be disbursed nationally
and how much internationally. And we would depart from the budget rules that apply
in many countries, according to which only foreign ministries or ODA agencies can
disburse money abroad. One sees that in Canada they already do this to some extent,
identifying whether funding is to be used for national purposes or spent
internationally.
Robin Davies. So the aggregate finance that you provide for global public goods would be
essentially the sum of your agreed or self-assessed burden share in a range of multilateral
financing mechanisms?
Inge Kaul. Yes, because you have to determine your own willingness to pay. And your
willingness to pay should be based on your consideration of how important you judge a
particular problem to be. Take, for example, ocean acidification. New Zealand might be
more concerned about that issue than some other countries, and therefore prepared to
make a higher contribution in per capita terms or as a share of its GNI.
Robin Davies. It’s hard to be sure how much ODA is currently being spent on global public
goods but by some estimates perhaps one-third of ODA is used in this way. Imagine that a
government actually decided to create separate financing streams for development and
global public goods. Most likely it would leave the total international public financing
envelope unchanged, and simply move approximately one-third of what is currently ODA
into a different basket. Let’s say that was all that happened. Are there benefits in even that
change?
Inge Kaul. I can see that donors might be afraid of a decline in ODA if it were separated
out. There is a frightened aid community out there. But donors ask developing
countries to be transparent and accountable. They must be so themselves, and set an
example. Spending on global public goods should be clearly presented and managed as
such.
Robin Davies. Nick Stern recently published a paper in which he was quite dismissive of
the concept of ‘additionality’ with respect to climate change finance1. He also argued that
there can be no practical separation of finance for development and global public goods.
You spoke earlier about incremental cost financing but, in practice, that concept has been
fairly difficult to work with. For example, the Global Environment Facility has basically
abandoned it.
Inge Kaul. Yes, but I disagree with Stern. As Amartya Sen always says, it’s better to be
vaguely right than precisely wrong. So even if there are some methodological problems
here and there, one has a gut feeling that one probably should pay something.
Robin Davies. Given the current fiscal and policy environment, do you think it matters
whether global public good financing is considered as part of ODA? Isn’t the problem simply
that it tends to be subtracted from existing levels of ODA?
Inge Kaul. Yes, but global public good financing is nevertheless not intended for
development purposes. It doesn’t belong in that category. ODA is a transfer, not a
payment for a service. When you do something about climate change mitigation in a
developing country you buy a precious service. The ‘thank you’ should come from your
side, not from the developing country’s side.
Robin Davies. What are your views about how various scenarios for the redefinition of
ODA, or the elaboration of the OECD Development Assistance Committee’s new concept of
‘Total Official Support for Sustainable Development’, might help or hinder the mobilisation
of genuinely additional finance for international public goods?
Inge Kaul. I think it’s basically about putting up bigger numbers without asking what
the numbers mean and what the financial flows are achieving. In the case of
remittances I think we shouldn’t bother about it at all. Whatever the recipients do with
remittances is fine. As for private investment, one hopes it goes where there is a return
to be made and sometimes where positive social impacts might at the same time be
achieved. But I find it confused and confusing to bundle these flows together with ODA
in constructing a new reporting category.
Robin Davies. But in principle might this approach not facilitate the kind of distinction you
described earlier, according to which one has ODA and then a complementary category of
international public finance? In other words, couldn’t one think of the complementary
category as creating space for a financing envelope that is specifically for global public
goods?
Inge Kaul. No, I want ODA as one strand of international public finance, and funding
for global public goods as another strand. If some developing country decides to let
some money from ODA flow back to global public goods, so be it; but that should be
counted as part of that developing country’s contribution to the production of global
public goods. One shouldn’t muddle the two types of finance, including by adding them
together in the way proposed. I do believe, however, that it would be important to have
a body to which countries report their expenditure on global public goods. It was at one
point proposed that the World Bank should play this role, while the OECD would
continue to track ODA flows.
Robin Davies. I am interested in your views on how the necessary quantum of public
finance for major international public goods, for a given period of time, might be broadly
determined at the global level. I also wonder what rationing considerations you might see
as relevant in the likely event that available resources fall far short of meeting
requirements.
Inge Kaul. One point that I think is particularly important here is that now, unlike in
the past, we seek to mobilise money before we have the projects to spend it on. The
private sector would never do that. You first develop what you think is a good project
and then you look for the finance. We want USD 100 billion for the Green Climate Fund
but where is the project pipeline? It’s one thing to have a rough idea of what funds we
need for infrastructure and so on, but quite another to have the projects.
Robin Davies. This is characteristic of the aid system, isn’t it? You start with what you are
willing to give and then you say, ‘Bring me the projects that fit within the envelope’.
Inge Kaul. Yes, that was OK for aid people because on the other side you had the
recipient governments’ plans and budgets. But with global public goods, we must
collectively plan and budget. Given that we don’t hear much about investment plans, it
might be assumed that a lot of climate change funds will just be given to the private
sector. Otherwise, why would you put a lot of money up? In the case of the World
Health Organisation (WHO), by contrast, some efforts have been made to estimate the
costs of the R&D efforts that they consider to be necessary. For example, costs related
to a new vaccine for malaria, or new drugs for tuberculosis since they cease to be
effective every few years.
Robin Davies. What sort of burden sharing arrangements, in your view, should apply in the
case of multilateral mechanisms such as the Green Climate Fund? How should countries
like China, India and Brazil participate?
Inge Kaul. If those countries wish to contribute to the Green Climate Fund, then of
course they can do so, and some are making small contributions. But the developed
countries have undertaken to set the climate straight and to make an appropriate
contribution to the achievement of that end. In order to be credible, one simply has to
live up to such undertakings. And now that China is advancing towards the position of
biggest polluter, I think the Chinese will step up their contributions. They are
politically savvy.
Robin Davies. You have said that if we want a developing country to do something that it
would not otherwise do, we are buying an environmental service for which a payment is
due. But, even allowing that there is no formula that can mechanically determine the size of
such payments, there remains a fundamental question about prices. How do we get prices
broadly right?
Inge Kaul. That’s a very difficult issue. There, I think we need to be pragmatic. I would
expect Brazil or India or South Africa—or any other relevant country—would think
through for themselves what would be a fair and mutually beneficial arrangement, and
we would do the same. If you think about the prices we pay for private goods, it’s the
same situation. The deal is done when the parties agree. This is a case of getting it
vaguely right, so that everybody goes home and feels the bargain is a good one for
them. Of course, on the developing country side, the payments received should do more
than simply cover the additional expenditures incurred, or the incentive is not there.
There has to be some profit margin.
Robin Davies. The negotiating process you describe has certainly been followed in actual
cases. However, if as a government we proceed from the premise that we are going to
negotiate a deal with country X, there must be a risk that we will not get good value for
money. In a private marketplace, it is my choice whether or not I shop around, because it’s
my own money. But here, governments on both sides of the deal are accountable to
taxpayers. Does this perhaps argue for some sort of reverse auction process?
Inge Kaul. Certainly in the area of climate change the best thing would be a global
carbon market. Then one would have the permits produced where they can be
produced for the least cost, and consumed where they are most needed. But even there,
climate change negotiators argue against arrangements that would see reductions
achieved mainly in developing countries, and therefore against developing countries
receiving too large a share of carbon market flows.
Robin Davies. Before the 2009 climate conference in Copenhagen, Mexico and Norway
jointly developed a model of a ‘Green Fund’ to which all countries, except the least
developed, would have contributed financially. Environmental services would have been
purchased in those developing countries able to supply them most cost-effectively,
including countries that might have made substantial contributions to the fund. Is this
broadly the kind of multilateral financing arrangement that you would prefer?
Inge Kaul. I was quite disappointed when I read successive governing board documents
from the Green Climate Fund. At first, they talked about giving money to the best-
suited providers. But now they are no longer thinking as an investor would. They have
shifted towards a distributional attitude, which is to slip back into aid mode. We want
to achieve climate change mitigation. Whoever can most cost-effectively bring about a
rapid reduction in emissions should be supported to do so. From this perspective,
there’s actually nothing wrong with the current pattern of climate finance allocation.
Something like 90 per cent of mitigation finance is going to the major polluters among
the developing countries, especially China and India. To the extent that ODA money is
involved—which at present is a very large extent—there is, of course, a substantial
question mark. But, sources aside, the allocation pattern is broadly appropriate. I do
not see the same cost-effectiveness principle at work in the Green Climate Fund.
Robin Davies. What is your broad appraisal of the strengths and weaknesses of the likely
SDG framework, on the assumption that in September 2015 its goals and targets will be
adopted approximately as proposed by the Open Working Group in mid-2014?
Inge Kaul. I think we will get the framework that has been proposed, and that there is
really nothing new in it. Most of the goals that are there we already have, either at the
global level or in national policies. The framework can nevertheless serve as a
reminder. When it comes to implementation, I think what will be important is that
developing countries, those who still hope to get aid, formulate their own, strong
country programmes. In particular, it will be important that developing countries
formulate their own global public goods agendas—in which areas do they hope that the
world will move, how, and in order to achieve what?
Another important point is that it is past time to introduce a structural reform within
both national governments and the multilateral system. We need an organisational
layer that is currently missing, or almost so, in order to deal more effectively with
global challenges. At present we are organised, nationally and internationally, along
the lines of geography and economic sectors. But we don’t just want to strengthen the
health sector; we want to control disease. We don’t just want to do agriculture; we want
to achieve food security. We don’t just want to have clean air; we want climate stability.
This is why we need issue management.
If you look at the problem of climate change, we have the secretariat of the UN
Framework Convention on Climate Change in Bonn but they are an issue manager
primarily for the international climate negotiations, and that’s a complex enough task.
Climate change, as an issue, has no ‘operational manager’ or—if you like—tsar or CEO.
We have the beginnings of this type of arrangement in the health sector, following the
2014 Ebola outbreak in West Africa, but as a result of compulsion rather than foresight.
Reality is forcing issue management upon us.
I often say to people, ‘Imagine the CEO of Boeing sitting in his or her office and
thinking, “Wouldn’t it be nice if we had a Dreamliner”’. And we say, ‘Wouldn’t it be nice
to leave nobody behind and rid the world of hunger’. The difference is that the CEO
knows where to get the wheels and engines and body constructed, and how to assemble
the plane. And the company doesn’t make the wings in one year and the wheels ten
years later. They just get the job done; they produce a complex good.
This is not something that can easily be done by agencies like the World Health
Organisation (WHO), or the UN Environment Programme. They are at bottom
secretariats for international negotiations, or standard-setting bodies, or technical
assistance providers. If you had a tsar for malaria, that entity should probably be in a
position to hold property rights, which the WHO can’t do. So one needs really
operational agencies, and they should be light-footed, equipped to play a facilitating
and convening role, and ably led by very clever people.
Robin Davies. One can set up a tsar within the UN system, but that system controls
relatively few resources. Isn’t the larger challenge to integrate what happens across the
international financial institutions and the UN system, and also the bilateral donor agencies
and international non-government actors?
Inge Kaul. I don’t quite know what to do with the World Bank. It’s an organisation that
should wonder what its future is. ‘Lumpy’ organisations like the Bank were an interim
solution for a time when countries were still lacking a lot of capacity, and when
international development agencies still had a strong country focus. So as long as we
have country programs, you do need something like UNDP or the World Bank. At the
same time, the World Bank now faces growing competition from the regional banks, the
Asian Infrastructure Investment Bank and the BRICS’ New Development Bank. So its
management must think hard about where the institution’s comparative advantage
lies.
One possibility is that it becomes like our budget for global public goods. However, it is
probably better to provide money to a global health fund in order to deal with global
health problems. You don’t need a lumpy organisation. Perhaps the Bank could offer
economies of scale, if it were restructured as a sort of umbrella for all the major issue-
specific global funds. But that might prove cumbersome. This touches, in fact, on my
original motivation for talking about global public goods: you have to produce them,
like Boeing’s Dreamliners, so you had better think about how and with what inputs and
partners. It’s not just a matter of improving this and strengthening that, as
conventional development agencies do.
Robin Davies. So in terms of organising action, you don’t see the SDGs as a hindrance?
Inge Kaul. No. The SDG framework is like a Fata Morgana on the horizon and the
challenge now is how to get there. We need to go to issue managers within countries.
When I started with UNDP, we still had country programming. Countries were in
charge. Now countries have to take charge again of their own programming.
Robin Davies. The idea that countries—even quite poor countries—would set their own
global public goods agendas is not often mooted. How might they articulate those agendas
for the purpose of financing?
Inge Kaul. In my view, all the money that went into, say, the Global Fund for AIDS,
Tuberculosis, and Malaria should first have gone to the country level, for the
developing countries. Then the developing countries should themselves have created,
for reasons to do with economies of scale and scope, a global health fund. The
developing countries would then have been given to understand that basically the
global health fund was theirs. They would have had it in their own budgets. They would
in this way have known how much it costs them to fight HIV/AIDS, tuberculosis, and
malaria. But they would still have saved money by pooling resources and working
together, allowing bulk purchasing and so on.
Robin Davies. So the developing countries would receive a quantity of resources on the
understanding that they would create a global fund, but the nature of this fund would be
their business?
Inge Kaul. Yes, and perhaps this just a paper transaction, and in that sense a ‘phony’
one. We say, ‘You have so much aid more than you think you have’. I can understand
that an actual transfer of funds to developing countries might create difficulties when
it comes to ensuring that the funds end up in the global pool in full and on time.
However, at least in order to have it all clear in our heads, it would have been good to
undertake such a transaction.
Robin Davies. A fundamental feature of the MDGs was their focus on concrete,
quantitative targets in connection with each goal. There are also SDG targets, notoriously
numerous, but for the most part these are not defined at the global level and therefore will
not motivate international cooperation. What is your view of these targets?
Inge Kaul. I recently discussed this in a paper about what I called the ‘missing middle’.
Targets are all very well. They give one a sense of direction. But it is quite remarkable
to discuss goals and indicators of success, yet keep mum about the means of
implementation. How do I get from the goals to the success if I don’t know what is in
the middle? I argue that we can have our ultimate goals but that our agenda should
have included ‘how’ targets, such as that by a certain date we have this and this
enhanced flexibility in TRIPS, or that by a certain date we have USD 100 billion in the
Green Climate Fund.
I raised this point in discussions in New York and felt that it was perhaps partially
recognised. Initially, means of implementation figured only very briefly at the end of
the draft SDG framework, but in the final proposal we see that they fiddled some words
on means of implementation into the other goals also, as additional targets. But when I
look at what is going to the Addis Ababa conference on financing for development, I’m
not very optimistic that this problem of the missing middle is really going to be
addressed.
Robin Davies. You’ve talked already about the idea of creating issue ‘tsars’ within the
multilateral system. I’m interested in your further reflections on how the existing
multilateral development architecture, and the governance and operations of some major
operative role in both developed and developing countries’ policy processes, particularly
those related to global challenges?
Inge Kaul. My ideas in this area have to be approached as a package. You have the dual
strands of public finance—ODA and finance for global public goods. You want
systematically to deal with global public goods, so you need an issue focus on the
operations side, since where it exists it tends to be more on the negotiations side.
Looking now at the operations side, of course you see that the goods to be produced are
very complex, and that inputs might come from all sides. For example, hand washing is
good for infectious disease control. So we need inputs from households, private firms,
national governments and many other sources, which must come together. Therefore
you need a CEO or tsar figure, supported by various sub-managers.
So, by having a production path in mind you can create better linkages. You are more
likely to see where you might be misallocating resources. For example, investment in
education helps reduce maternal mortality and achieves various other outcomes that
might also be good for the climate. And if you remember that the goods in question all
end up in the global public domain, you also see how some are colliding with others,
like TRIPS and global health. So there are synergies to be promoted, gaps to be filled
and inconsistencies to be addressed. And all of this should result in cost savings.
Then—and this is by no means the least important step—we have to break out of the
status quo orientation we have in our global governance structures. We have to give
voice to the global commons, and also in some way to future generations, because many
of the issues we face involve stock externalities and will persist over a long period of
time. This would be the role of the Global Stewardship Council. And such a body, while
having no decision-making authority, would need to have a high level of political
credibility and influence. Therefore I thought if you could engage outstanding women
and men from the North and the South—people like Mozambique’s Graça Machel or
Australia’s Gareth Evans—people who don’t have any self-interested goals to achieve,
who are simply themselves, independent but visionary—and they were to come
together in such a council, something could be achieved.
Robin Davies. You’ve described quite systematically a coherent set of arrangements for
financing and managing the production of global public goods. Yet there is little indication
that such arrangements are in prospect. Why do governments not require their multilateral
institutions to work more effectively towards delivering major global public goods?
Inge Kaul. In my view, the biggest obstacles to reducing global risks are states. I have
seen pension funds and other big investment funds and corporations crying out for
standardised environmental regulation because, they say, ‘the search costs for us are
too high’—that is, it’s costing them too much to figure out what the environmental
conditions and standards are in each country. But governments prefer to maintain
their flexibility, whether in financial market or environmental regulation, hoping
thereby to achieve a national advantage.
and public attitudes about the relative value of ODA, than it will on establishing
mechanisms to keep financing for GPGs separate from ODA.
9 It would have been interesting to hear more from Kaul about a number of particularly
interesting and provocative ideas she mentions in the interview. A good example is her
proposal that new multilateral organisations need to be established to become the
operational ‘issue managers’ for each GPG. How does she think these organisations should
be governed and how would they exercise authority over the existing sector-based
organisations (WHO, WFP, UNEP, etc.) upon which they would presumably rely for
expertise and implementation capacity? In the same vein, I feel that Kaul is too quick to
dismiss a potential role for the World Bank in addressing GPGs. On the one hand, she feels
that single-sector multilateral institutions, such as the WHO, are ill equipped
operationally to address the complex, multi-sector nature of GPGs. On the other hand, she
is dismissive of the Bank, which does have significant capacity, experience and potential
to design and manage integrated, multi-sectoral operations on a global scale. It seems to
me that it would be politically more feasible to establish a response to GPGs that involves
a role for the Bank integrated with the other MDBs, than it would be to establish new
organisations at the global level, each assigned a separate GPG.
10 Kaul concludes the interview with a recommendation that highlights both idealism and
its limitations. She proposes that a ‘Global Stewardship Council’ be established to help us
‘break out of the status quo orientation we have in our global governance structures’. The
Council would have no decision making powers but would rely on the political credibility
and influence of its members, ‘outstanding women and men from North and South --
people like Mozambique’s Graca Machel or Australia’s Gareth Evans’, to achieve the
result. Kaul seems to recognize that the odds are stacked against such a Council being
able to re-orient global governance, but nevertheless concludes hopefully that ‘something
could be achieved.’ Actually, it seems to me that little would be achieved in the absence of
a greater public sense of urgency about GPGs and acceptance of the view that better
global governance is an essential missing piece in the response. In the case of climate
change, I am convinced that this sense of urgency, including for global leadership, will
build rapidly in the years ahead in response to increasingly extreme weather. In the
meantime, however, the trend is in the opposite direction: following the December 2015
UN climate change conference in Paris the focus of attention is more likely to shift away
from the multilateral level towards national-level action and planning.
12 The agreement in itself is quite remarkable, given that solutions to ever increasing global
challenges were sought at a time of intense pressures on public budgets in countries of
the North and South alike. It shows that there is a determination to embark on
multilateral action in such key areas as eliminating extreme poverty, combatting climate
change or fostering gender equality. The negotiation process and the outcome document
are also reflections of the increased complexity of the challenges the world faces and the
global response that is required to master them. Just throwing (development) money at
the issue is no longer an option. Rather, the Addis Ababa Action Agenda calls for a
paradigm shift in the way all sources of finance—public and private, domestic and
international—are used.
13 The debate about global public goods, which Inge Kaul and Robert Glasser eloquently
summarise in their contributions, is but one, albeit very important, cornerstone of the
landmark agreement reached in Addis.
14 From the beginning of the intergovernmental negotiations it was clear that an ambitious
agreement in the Ethiopian capital would only be possible if it covered the broad range of
financial and non-financial means of implementation that are all required to provide a
conducive national and global enabling environment for sustainable development. Given
that only a small share of the financing needs of the SDGs will be covered by public funds,
let alone international public funds, Switzerland and other countries sought throughout
the process to also discuss measures to address the need for an alignment of private
investment with sustainable development goals. At the same time, Switzerland also
stressed the importance of effective policies at the national and international levels,
which often have a much bigger impact on sustainable development than just creating
new funds or financing mechanisms for specific development challenges. This is
particularly relevant for policies at the national level, which lay at the core of generating
domestic resources for sustainable development.
The Three Pillars of the Addis Ababa Action Agenda: Taxes, Investment, Aid
15 It comes as no surprise that the AAAA highlights the fact that each country will bear the
main responsibility for its own sustainable development. This emphasis is no different
from that of earlier agreements, made in Monterrey (2002) and Doha (2008). However, the
Addis Ababa outcome document is much more specific in its integration of the many
important policy areas that constitute important pillars of domestic resource
mobilisation. Moreover, it highlights in particular those areas where international
support and coordination will play a key complementary role to the efforts of national
governments. This is first and foremost true for the most contested topic of the
negotiation process: taxes.
16 In the AAAA, countries commit to ‘enhancing revenue administration through modernized,
progressive tax systems, improved tax policy and more efficient tax collection’ and to ‘work[ing] to
improve the fairness, transparency, efficiency and effectiveness of our tax systems, including by
broadening the tax base and continuing efforts to integrate the informal sector into the formal
economy in line with country circumstances’. Supporting developing countries in
strengthening their capacities for effectively mobilising and efficiently spending their
domestic resources was identified as a key area for official development assistance (ODA),
which was also amplified by the Addis Ababa Tax Initiative, signed at the margins of the
conference by many OECD countries, including Switzerland, as a pledge to increase ODA
in this area.
17 However, in the spirit of the universality of the agenda, the AAAA also highlights the fact
that international cooperation matters for a country’s capacity to attract and mobilise
domestic resources. This is particularly pertinent in the area of illicit financial flows
(IFFs), which in international discussions go far beyond funds from illegal activities.
According to some estimates, the money leaving developing countries due to mostly legal
tax optimisation strategies of multinational corporations by far surpasses the funds that
enter the developing world in the form of ODA. Substantially reducing IFFs by 2030 is
therefore a key ask in the AAAA, including domestic and international measures aimed at
limiting tax evasion and corruption. The agreement to strengthen the UN committee of
experts in tax matters may have fallen short of many developing countries’ expectations
of creating a new international tax body. However, it is a clear sign that the tax agenda
pushed by organisations such as the OECD or the G7/G20 matters not only for rich
countries with dire public budgets but also for developing countries trying to ensure that
they profit from increased investments, in particular those countries with large
extractive sectors.
19 Maybe less contentious than some would have expected, especially representatives of
civil society, is the agreement on the prominent role private business and finance will
have to play in implementing the SDGs—the second pillar of the AAAA. It seems that most
countries have replaced ideological battles with a pragmatic approach to account for the
fact that the vast investment needs in areas such as infrastructure or energy can only be
met by increased private finance. Incentivising long-term private investment in areas
that are key to sustainable development is therefore the main thrust of the second
chapter of the AAAA, which highlights the importance of aligning private sector
incentives with public goals, including by incentivising the private sector to adopt
sustainable practices. This includes measures for increased transparency in investment
decisions that will allow consumer pressure to push investments in sustainable sectors
and businesses in the same way it has increased the supply of sustainable products over
the past decade. There is also a lot of language about blended finance in the AAAA and
about the potential for well-designed public–private partnerships to help unlock
necessary private finance in key areas, particularly infrastructure.
20 But private finance for sustainable development not only means mega investments in
dams and railways (even though those are most certainly needed). Switzerland has
particularly pushed for progressive language on some of the smaller transfers that,
combined, can make a big difference—notably migrant remittances. These private funds
surpass the total ODA disbursements in developing countries by a factor of almost four
and are already contributing to sustainable development in migrants’ countries of origin.
However, transferring remittances is still a very expensive endeavour, especially in low-
volume corridors. It is therefore important that the AAAA puts pressure on the
international community to follow through with its commitment to lowering average
transfer prices to 3 percent of the transferred amount and ensuring that no corridor
charges more than 5 percent. Increased competition and innovation in the money
transfer industry will likely mean that these goals are achieved way before the target, set
in the AAAA, of 2030. However, policymakers have to ensure that laws intended to limit
funding for terrorist activities or money laundering are not completely cutting off
countries from money transfer providers where migrant remittances provide a lifeline to
vast proportions of the population.
21 The AAAA is very clear that, as a third pillar of financing for sustainable development—
alongside domestic resources and private finance—there is a unique role that only
international public finance can play. Least developed countries (LDCs) and countries
emerging from conflict still very much depend on ODA, and their ability to mobilise
private investment or domestic resources remains limited. Despite initial success with the
Millennium Development Goals (MDGs), getting to zero with absolute poverty will still
require substantive international public resources. In fact, the task today is more
challenging than it was at the beginning of the millennium when the MDGs were
launched and when initial success came to a large extent from strong growth in
developing countries and emerging economies, notably China or India, which were able
to reduce poverty mostly with their own domestic resources and efforts. On the contrary,
today the world is faced with a range of weak, conflict-and-crisis-affected countries and
regions. The cost of the humanitarian response to disasters and conflicts alone has risen
by 660 percent since 2000 and the UN has declared an unprecedented number of large and
severe international crises of the most urgent level (L3).
22 There are two parts of the discussion with Inge Kaul that were central in the treatment of
international public finance in the negotiations that led to the AAAA: First, there is—of
course—the global public goods (GPGs) agenda, most prominently climate change. As Kaul
explains, the discussion about financing GPGs has been around for many years and has
not yet resulted in a political decision or practical financing system. However, the
pressure from the new and enlarged 2030 agenda with its sustainable development goals
(SDGs) has led to a reflection within the OECD DAC on a new and complementary measure
to ODA, currently being discussed under the working title of “Total Official Support for
Sustainable Development” (TOSSD) and reflected in the AAAA. TOSSD should increase
transparency and rigour in reporting on development finance beyond ODA. The proposed
measure could ‘incorporate international finance from official sources and mechanism that cover
activities promoting and enabling sustainable development, including contributions to global
public goods, when they are deemed relevant for development’.2
23 We are more optimistic than Inge Kaul about the fact that this new measure will indeed
have an effect on the ground. Just as the reporting requirements for ODA have made
official public aid flows more transparent than almost any other source of public finance,
including domestic spending in many countries, TOSSD can help policymakers and
citizens understand the quantity of financial flows that are available to a country to
finance sustainable development. More transparency will lead to more informed debates
about which flows are contributing to sustainable development, and which are not.
Moreover, this will occur in a manner that takes into account the specific composition of
each country’s support to sustainable development. In so doing, it renders the proposed
dismantling of ODA into a ‘development’ and a GPGs part less relevant as GPGs can indeed
be supported by many different categories of the new TOSSD measure, often at the same
time.
24 Second, the language in the international public finance chapter of the AAAA is the result
of a discussion about whether or not the system of international public finance
institutions is ‘fit for purpose’ to help support the implementation of the SDGs, and by
extension the global public goods agenda. Here, the AAAA seems to support Kaul’s
suggestion that the current multilateral finance system needs to be looked at,
encouraging ‘the multilateral development finance institutions to establish a process to examine
their own role, scale and functioning to enable them to adapt and be fully responsive to the
sustainable development agenda’. There are specific references in the AAAA to the role of
international finance institutions (IFIs) in complementing national resources on GPGs
such as natural disasters and pandemics. Moreover, specific providers of GPGs, including
the Green Climate Fund, are mentioned and countries are encouraged to support these
institutions and fulfil their pledges.
25 The discussions in Addis Ababa on the suitability of the current system of international
financial institutions did not enter the level of detail Inge Kaul goes into in her remarks.
However, there are a few important issues she raises that we would herewith like to
address: First, the world is currently witnessing one of the most profound changes ever in
the international public financial system with two large multilateral banks having
emerged in the past 12 months. This means a dramatic increase in capital available to
finance sustainable, accessible, and resilient quality infrastructure in developing
countries and in enhanced financial and technical support. Both, the Asian Infrastructure
Investment Bank and the New Development Bank (formerly known as the BRICS Bank)
are mentioned in the outcome document, something Switzerland has welcomed,
particularly the reference to ensuring that they will uphold social and environmental
safeguards. If designed well, these banks can make a profound contribution to financing
and delivering GPGs.
26 Second, existing institutions themselves, most notably the World Bank, are undergoing
reforms to ensure they can contribute to the GPG agenda. The creation of global practices
at the World Bank that can deploy the best global knowledge and talent for many SDG
sectors is certainly a step in the direction of a multilateral effort to provide GPGs. The
most recent replenishment of the International Development Association (IDA) also
showed countries’ clear intention to move the Bank, and especially the IDA, in the
direction of using scarce concessional funds where they can have the biggest impact at a
global level. But true, in order to fully finance the GPG agenda, shareholders would have
to go much further. And recipient countries would have to seriously engage in a
discussion that goes beyond a purely ‘loans to country’ model and convinces them that
investing in GPGs can be aligned with national interests.
27 In this sense, the AAAA certainly does not constitute a document that reforms the
international public finance system. But this was never the aim. Rather, the AAAA is an
ambitious roadmap to transform the way finance is currently allocated, to put the world
on a more sustainable path. The fact that the document was agreed on by all UN member
states means that the international community has understood what the ingredients for
such a paradigm shift are. Now it’s our common duty to follow through and put these
measures in place.
NOTES
1. ‘Understanding climate finance for the Paris summit in December 2015 in the context of
financing for sustainable development for the Addis Ababa conference in July 2015’, Policy Paper,
ESRC Centre for Climate Change Economics and Policy, Grantham Research Institute on Climate
Change and the Environment, March 2015.
2. OECD DAC, March 2014. Towards more inclusive measurement and monitoring
of development finance: Total Official support for Sustainable Development
(TOSSD).
ABSTRACTS
Editor’s Note : These papers are contributions to the ‘Policy Debate’ section of International
Development Policy. In this section, academics, policy-makers and practitioners engage in a
dialogue on global development challenges. Papers are copy-edited but not peer-reviewed.
Instead, the initial thematic contribution is followed by critical comments and reactions from
scholars and/or policy-makers.
The initial paper takes the form of a structured interview with Inge Kaul, conducted by Graduate
Institute Research Fellow Robin Davies, on the topic of Global vs. National Public Goods in the
post-2015 international development framework. Kaul argues that for the good of developing
countries and the world as whole, support from developed countries for the provision of global
public goods (GPGs), such as climate change mitigation and communicable disease surveillance
and control, should be conceived as an international extension of their domestic policies.
Financing for GPGs constitutes payment for services rendered, not aid. Likewise, primary
responsibility for the production of GPGs should rest with issue- and outcome-oriented ‘tsars’ at
both the national and global levels, rather than with overstretched treaty- or country-oriented
multilateral organisations. It follows from this that the distinction within the SDG framework
between global and national goals is not merely one of level, but one of kind. Global goals call for
distinctive financing and implementation arrangements.
The initial paper is followed two critical comments, (1) by Robert Glasser, Executive-in-
Residence, Geneva Centre for Security Policy, and (2) by Michael Gerber, Ambassador and Special
Envoy for Global Sustainable Development, Swiss Federal Department of Foreign Affairs with
Luca Etter, Policy Advisor at the Swiss Agency for Development and Cooperation (SDC).
AUTHORS
INGE KAUL
Inge Kaul is adjunct professor at the Hertie School of Governance, Berlin, Germany. She
specializes in global public goods, with a focus on the financing of international cooperation,
public-private partnerships, and global governance including UN reform. She was the first
director of UNDP's Human Development Report Office from 1989 to 1994 and subsequently
director of UNDP's Office of Development Studies from 1995 to 2005. She is the author of
numerous publications on international public economics and finance and was lead editor of the
books Global Public Goods: International Cooperation in the 21st Century (1999), Providing Global
Public Goods: Managing Globalization (2003) and The New Public Finance: Responding to Global
Challenges (2006).
ROBIN DAVIES
Robin Davies is a Research Fellow at the Graduate School of International and Development
Studies and concurrently Associate Director of the Development Policy Centre at the Crawford
School of Public Policy, Australian National University. He is co-editor, with J. Warren Evans, of
the book Too Global to Fail: The World Bank at the Intersection of National and Global Public
Policy in 2025 (2015). He worked at the Australian Agency for International Development
(AusAID) for almost 20 years, including postings in Paris and Jakarta. Most recently, he headed a
division with responsibility for global development policy and for multilateral programs and
partnerships. He has represented Australia on the G20 Development Working Group, the
governing bodies of the Climate Investment Funds, and the OECD Development Assistance
Committee. He managed Australia’s program of development co-operation with Indonesia from
2003 to 2006.
ROBERT GLASSER
Robert Glasser is an Executive-in-Residence at the Geneva Centre for Security Policy. From 2007
to March 2015 he was Secretary General of CARE International, one of the world’s largest
humanitarian relief and development organisations. He was previously Chief Executive of CARE
Australia and an Assistant Director General of Australia’s official aid agency, the Australian
Agency for International Development (AusAID). Earlier in his career he worked on international
energy and environmental policy at the US Department of Energy, and on peace and conflict
issues at Cornell University and the University of California. Dr Glasser serves on the boards of a
number of organisations, including the Global Call for Climate Action (GCCA), a diverse network
of more than 450 non-profit organizations in more than 70 countries focused on advocacy to
prevent climate change.
MICHAEL GERBER
Ambassador, Swiss Special Envoy for Global Sustainable Development
LUCA ETTER
Policy Advisor, Swiss Agency for Development and Cooperation (SDC)