Report on the “New Instruments for Development” Plenary Session and Workshop 3 “Financial Engineering and Efficiency, Some Aspects”

(Friday 29 May 2009)

Plenary session

The morning of 29 May was devoted to continuing discussions on innovative financing mechanisms explaining innovative opportunities offered by financial engineering instruments. The French Development Agency and the World Bank helped to organize this session.

Mr Eckhard Deutscher, the Chair of the OECD Development Assistance Committee (DAC) opened the session. He explained that the DAC High-Level Meeting which was held recently had put forward a reform of the DAC in terms of priorities, instruments and work plans. He welcomed the growing importance of innovative financing mechanisms and the new partnerships they generated. He stressed the opportunity to take full advantage of the existing institutions and channels of intermediation, to curb the tendency to create new institutions, and to apply the Paris and Accra Declarations and the agenda for results-based management of all aid flows.

Pierre Le Houérou, Vice President for Concessional Finance and Global Partnerships at the World Bank, pointed out that innovative financing supplemented traditional aid, while aiming to maximize the impact. Financial engineering proposes new solutions to tangible problems as can be seen with the IFFIm and AMCs. He however explained that innovative financing volumes currently generated to help low income countries have remained relatively low when compared to aid received by these countries. It has also been noted that the implementation of new financial solutions often depends on the availability of concessional finance. It would be a good idea to identify the most promising mechanisms and to promote their scaling up, to integrate global initiatives into country programmes and priorities, and to remain especially focused on the needs of low income countries.

Mr Le Houérou’s speech (in English only)

When introducing the roundtables to come, Pierre Jacquet, chief economist and director of the French Development Agency recalled interest in diversifying the financial tool box, rooting its development in research into flexible and imaginative solutions to well identified problems the existing financing mechanisms have trouble dealing with. He stressed the fact that unlike the model that shaped traditional ODA, the nature of financial instruments is not neutral compared with objectives and greatly determines their efficiency. To show this, he gave examples of instruments used to manage vulnerability and risks, of various natures, actors in developing countries are faced with, and instruments facilitating results-based incentives.

Mr Jacquet’s speech (in French only)

The French Development Agency and the World Bank announced that they are organizing with the Bill and Melinda Gates Foundation in March 2010 in Paris a market place which will further address these issues.