Financing development: from Monterrey to Doha

Alison Evans Simon Maxwell
26 November 2008

For the world's poorest nations, the United Nations conference on financing for development (FFD) in Doha on 29 November - 2 December 2008 is the most important economic summit in half a decade.

Even before the financial crisis erupted, this meeting was likely to be marked by recrimination. Developing nations feel that they have been hit first and hardest by oil shocks and food-price surges, and failed by G8 promises on aid that have not materialised. The aid shortfall already amounts to some $30 billion a year, or 30% of pledges made at the Gleneagles summit in 2005. The stakes are now much higher, as the financial crisis bites. Research from the Overseas Development Institute (ODI) suggests that total financial flows to developing countries are likely to shrink by ten times as much as the extra promised by the G8 in Gleneagles: $300 billion - or 25% of current flows.

Alison Evans is director of programmes for the poverty and public policy group of the Overseas Development Institute (ODI)

Simon Maxwell is director of the Overseas Development Institute

Also by Simon Maxwell in openDemocracy:

"Inside the palace of glass" (27 June 2001)

"Chemical warfare in the bathroom" (15 August 2001)

"The global development agenda in 2007" (21 December 2006)

"Rome's food summit: a torch passed" (6 June 2008)

"Development in a downturn" (4 July 2008)

" A new global order: Bretton Woods II...and San Francisco II" (11 November 2008) - with Dirk Messner

Growth forecasts have been cut repeatedly in autumn 2008. The International Monetary Fund (IMF), for example, predicted growth rates for the different regions of the world in October and again in November. In just a few weeks, global growth for 2009 was downgraded from 3% to 2.2%, and for sub-Saharan Africa from 6.3% to 5%. The next round of estimates may well be even more pessimistic.

There will certainly be job losses. There will also be an increase in poverty, adding to the 100 million driven back below the poverty-line by the sharp increases in food prices in 2007-08. The World Bank estimates that for every 1% drop in growth, another 20 million people slide into absolute poverty.

Developing countries have not yet felt the full force of the hurricane that is about to blow through the world economy. But it is time to start nailing shutters on the windows (see "Development in a downturn", 4 July 2008).

The Monterrey model

The FFD conference in Doha is not the arena for a global programme to fight recession. That discussion is ongoing at the G20, the group of wealthy nations and emerging economies which met in Washington on 15 November 2008 and will reconvene under British leadership (probably on 2 April 2009 in London). For the same reason, there is unlikely to be much progress on the core G20 issue of financial-sector regulation. What, then, can be hoped for?

It is important that this is a United Nations event in which all countries are represented, not just the largest economies. Thus, Doha will agree a statement about global solidarity. This could be a bland homily about how we are all in this together, with no concrete commitments; or it could be a strong vision of global social justice, with specific agreements to share the pain and reduce global inequality. Expect the first.

The outcome document will reaffirm the basic bargain agreed at the first FFD conference in Monterrey in 2002. This meeting, just six months after 9/11, marked a turning-point in relations between rich and poor countries. For their part, developing countries made a commitment to good policies, good governance and the rule of law. Developed countries matched this with a commitment to debt relief and increased aid. The guiding principle was one of partnership. As a model of international cooperation, that still holds.

The Doha document is, for the moment, a tangle. But it will lay out the current agenda, and the main headings from Monterrey remain: domestic financing, private finance, trade, aid, debt, and systemic issues.

Much of the text will be aspirational: yes to trade deals, no to unsustainable debt, yes to donors keeping their promises. On past experience, it will not set out who must do what, and by when. Is there room for more than aspiration? There is nothing like a crisis to focus minds and make bold leaps seem more feasible.

Doha's choice: four recommendations

In this light, four steps could be taken in Doha to create a new deal.

First, Doha should make specific commitments to safety-nets and social protection for the poorest people. Humanitarian relief should be guaranteed for the 90 million people already in need of food aid, and the millions more who will join them as the recession deepens. Beyond that, ODI research shows that options exist to deliver social protection in almost every country - through cash grants, old age pensions, targeted subsidies, or direct provision of goods and services.

Among openDemocracy's articles on global development policy:

Jonathon Porritt, "'As if the world matters': reconciling sustainable development and capitalism" (30 November 2005)

Ehsan Masood, "The aid business: phantoms and realities" (18 July 2006)

Michael Hopkins, "Sustainable development: from word to policy" (11 April 2007)

John Elkington, "Brundtland and sustainability: history's balance-sheet" (11 April 2007)

Stephen Browne, "G8 aid: beyond the target trap" (6 June 2007)

Paul Collier, "The aid evasion: raising the ‘bottom billion'" (11 June 2007)

Andrew Shepherd, "The anti-poverty relay: a progress report" (24 September 2008)

Anita Sharma, "The core crisis: standing with the poor" (30 October 2008)

Andre Wilkens, "The global financial crisis: opportunities for change" (10 November 2008)Doha should therefore encourage all countries to develop and support concrete plans to create safety-nets for the most vulnerable, and commit the international system to providing additional financial support. But this financial support no longer refers to traditional donors alone. The international system now includes the new donors -  such as China, India, and the oil-rich countries of the middle east. What a dramatic gesture it would be, at a time of global threats and falling oil prices, if those countries were to use Doha to announce timetables for increases of aid.

Second, Doha should build on the new enthusiasm for multilateral solutions, by putting the UN, the World Bank and the multilateral development banks (like the African and Asian Development Banks) at the heart of the aid system. At present, only about 25% of aid is reported by the Organisation for Economic Cooperation and Development (OECD) as multilateral, with 75% channelled bilaterally through a frighteningly large, confusing, incoherent and growing number of bilateral agencies and special-purpose funds. This has to change. A specific Doha commitment could be to stand the aid system on its head, with donors agreeing that 75% of aid should be multilateral by 2013.

The management of multilateral aid also needs an overhaul. Aid is coordinated by a donor club, the Development Assistance Committee (DAC) of the OECD, which, for all its good work, lacks legitimacy among developing countries and the bite to underpin enforcement. The UN has a separate body, the Development Cooperation Forum (DCF), which has suffered from association with the poor performance of the UN Economic and Social Council (Ecosoc), and the underfunding and political pressures that afflict the UN's department of economic and social affairs (DESA). Could the best of both be preserved, if the DAC and the DCF were merged or more strongly linked?

Third, Doha should establish a new formula for mutual accountability between rich and poor countries. Conferences, with their tendency to produce declarations with good intentions, are a poor way to do this. An alternative is to look at the structures developed by the European Union with its (to date seventy-nine) African, Caribbean and Pacific partners in the Cotonou agreement signed in 2000. This is based on a treaty with the force of law, and its key principles are enshrined and backed up by an agreed arbitration procedure. There is political oversight, through a joint council of ministers, and a joint parliamentary assembly. The UN political apparatus provides a structure of this kind. What is missing is an arbitration procedure to monitor progress and hold countries to account.

Fourth, Doha should build on shifts in the provision of development aid. Governments alone cannot bear the burden of support to development. Philanthropic donations may - when debt-relief, humanitarian aid and technical assistance are removed from the equation - be outstripping official aid flows. Companies have taken up the cause of global corporate citizenship, looking not just at their charitable donations, but also at the impact of their activities on development. This is a win-win for companies, reducing costs and boosting their local popularity. Doha should celebrate this trend and launch a programme to codify standards.

At the height of another global crisis, in August 1941, Franklin D Roosevelt and Winston Churchill agreed the Atlantic Charter - a vision of a world that could, realistically, be created.  From that vision stemmed victory in war, the Universal Declaration of Human Rights, the creation of the United Nations and the financial scaffolding of the Bretton Woods system. Can Doha exceed expectations and be the platform from which to launch a change of similar magnitude?

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