More Solidarity to Address the Crisis: Innovative Financing for Development

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The economic and financial crisis we are experiencing should not make us neglect what is one of the keys to our future, the development of the poorest countries. On the contrary, the Millennium Development Goals set in New York in September 2000 remain a priority. By 2015, we need to eradicate extreme poverty and hunger; achieve primary education for all; promote gender equality; reduce child mortality and improve maternal health; combat major diseases including AIDS, tuberculosis and malaria; ensure environmental sustainability; and develop a global partnership for development. Significant gains have been made, but they should not be compromised by current problems.

Hardest hit by the crisis, developing countries are also a part of the solution. Engines for growth are in the South and we still haven’t learned that in helping them develop, we are helping ourselves emerge from the crisis. Decisions taken at the G20 meeting in London at the impetus of President Sarkozy are crucial in this regard to our collective action.

Innovative financing plays a driving role in this. Official development assistance, with the $119 billion raised in 2008, cannot do everything, although it generates indispensable leverage to ensure other types of development financing including domestic tax revenues, private investment and migrants’ remittances. Today we need to use innovative financing mechanisms to address the needs compounded by the crisis, in the health, education and environment sectors.

With such mechanisms, additional resources to traditional official development assistance have been raised: the airline ticket solidarity levy introduced by 13 countries and ensuring paediatric HIV/AIDS treatment for 100,000 children every year through UNITAID programmes; the International Finance Facility for Immunization (IFFIm), to which France is the second leading contributor, which helps vaccinate over 100 million children in the world; commitments to pharmaceutical industries (minimal purchase price for a set amount and during a given period of time) to manufacture and disseminate a vaccine for pneumococcal disease, which kills 800,000 children every year; a climate change Adaptation Fund receiving its funding from a portion of carbon credits; and the RED Programme set up by the Global Fund Against AIDS, Tuberculosis and Malaria funded by private contributions.

The fact that innovative financing mechanisms have multiplied since the Monterrey Conference in 2002 shows that we are rejecting indifference and taking action to help the poorest people. The number of such mechanisms, which have raised over $2 billion, now stands at eight. Yet we need to scale up innovative financing, as President Sarkozy urged us to do at the United Nations Doha Conference last November. To this end, the European Union, under the French Presidency, called on member countries to put them into widespread use.

The Leading Group, established in 2006 at the instigation of France, Brazil, Spain and Norway, is making a critical contribution to this essential scaling up. It is a forum for generating ideas, rallying support for practical projects and sharing best practices. It brings together 58 countries from all over the world and works with major NGO platforms and international organizations. France currently holds the Group’s six-month presidency.

What do we hope to accomplish at this Conference? First of all we hope to respond to the call launched at Doha by working with new partners (states, NGOs, international organizations, companies, foundations) and by working on concrete projects addressing developing countries’ needs. In concrete terms, we have called on every country in attendance to implement an innovative financing mechanism over the coming year.

Projects that are currently in the preparatory stages, such as voluntary contributions on airplane reservations backed by UNITAID, should take concrete form and have a clear timetable. I also hope that we take forward discussions on the allocation of a portion of income from the auctioning of carbon credits to development. Lastly, the technical feasibility of an extremely low tax on currency transactions and the possibility of voluntary contributions in the international finance sector should be explored. Fresh commitments and new sectors: in addition to the health sector, which benefits most from innovative financing, the sectors of education, food security and adaptation to climate change should benefit from such new international solidarity mechanisms. Channelling private savings towards development will help us achieve these goals. In this area, France has been gaining expertise that everyone will find useful.

France, a pioneer in devising many innovative instruments, today would like to continue to put forward new ambitions to its partners to help the poorest people. Such reflection should be conducted in the interest of the international community: it remains an imperative to convince the world of the usefulness of innovative financing and to think of ways to devise mechanisms which are adapted to the developing world’s needs based on the principle of economic rationality. With this in mind, we now need to conduct courageous and ambitious discussion which allows us to take full advantage of the growing financial interdependence of international markets. An extremely low fraction of transactions carried out every day could for example be deducted by streamlined mechanisms and on a voluntary basis because financing development must become a moral imperative. The funds would then be used for projects of manageable size, chosen for their inventiveness and their efficiency.

The Leading Group will also work on two topics which the crisis has revealed and which touch on innovative financing mechanisms: fighting tax avoidance which deprives developing countries of significant resources and reducing the cost of migrants’ remittances and improving their use. The Paris Conference will also give us the chance to ensure that the work of the Leading Group and that of the Taskforce on Innovative Financing for Health Systems launched by Gordon Brown last year are more complementary.

By providing more solidarity, imagination and commitment, innovative financing mechanisms are no longer an option, but have clearly become a necessary way to provide assistance to our world’s poorest people.

Bernard Kouchner

Minister of Foreign and European Affairs

3 June 2009

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