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NGO Statement to the FfD III Prep Com
May 7, 2001Heading IV - Increasing International Financial Cooperation for Development
It is an honor and a pleasure to address the delegates to FfD III on behalf of the ODA/CTT NGO Caucus. We would like to address the means for increasing international financial cooperation for development by addressing two issues: official development assistance (ODA) and currency transactions taxes (CTTs).
ODA is only one financial instrument for poverty eradication and financing global goods, but an essential one. For many countries ODA will continue to be vital. In spite of these clear needs, developed countries have not implemented commitments to increase market access nor met their ODA promises. While debt cancellation can free resources for development, neither trade nor debt relief can compensate for the decline in ODA levels over recent years. Both the quantity of ODA commitments and quality are at issue.
Donors should make measurable commitments to increase aid effectiveness. This would include a greater level of generalized budget support, and more buy-in for program rather than project approaches. A genuine transfer of ownership of development, without imposition of more conditionalities in whatever guise they may come, is absolutely essential. Capacity building, too, will benefit from untying aid. The differential impact of poverty on women requires specific and tailored responses that move beyond micro-credit.
Donors should reform aid procurement practices by adhering to best practice guidelines that support skills development, employment creation, and the development of small and medium enterprises. Governments should explore further how targeted procurement can ensure local economic development and the eradication of poverty together with ensuring that social reproduction is given due importance.
Regarding the levels of ODA, only 5 countries have reached or surpassed 0.7% of GNP. Denmark, Luxembourg, Netherlands, Norway and Sweden are to be congratulated in this regard. For the remainder of the DAC countries, however, the average for 2000 was a mere 0.22%. Immediate additions to meet the 2015 goals of poverty eradication are needed and grants rather than loans are necessary. We challenge donor countries to offer more than words towards meeting the 0.7% target for ODA. A specific timeline for the delivery of targets will create the benchmarks we need to monitor your effectiveness.
Our second point is in regard to currency transactions taxes or CTTs as innovative means of providing finance for development.
The global community insists on a rules-based system for global trade in goods and services, yet has virtually no controls on the global trade in money.
When portfolio investment fled during the SouthEast Asian and subsequent financial crises, prices skyrocketed, wages fell, companies went bankrupt and joblessness soared. Three decades of poverty reduction in Asia was wiped out within weeks. Until portfolio investment is regulated, and systemic volatility controlled, development will be constantly threatened.
G20 proposals to repair the financial architecture in the wake of the crises have been woefully inadequate, as they fail to address the supply side of the problem. This root cause of financial crises can be addressed, in part, through the use of currency transactions taxes.
The debate on currency transactions taxes is being stifled, however, by those with a vested interest in volatility and those whom they influence. It is necessary to confront the myths that abound.
1. CTTS are not global taxes that threaten national sovereignty.
2. CTTS will not undermine productive investment flows.
3. CTTS are not easy to evade.Currency transactions taxes are national measures implemented domestically by any government with the authority to tax. CTT measures are designed to target short-term flows while negligibly affecting long term investment. They further enhance productive flows by reducing the costs of hedging to protect against exchange rate fluctuations. Asset migration and substitution can be prevented by implementing CTTs through the highly regulated and centralized payments system controlled by central banks.
Currency transactions taxes can provide billions of dollars of new resources for sustainable human development and the provision of global public goods. CTTs can further provide an enabling climate for development by increasing the stability of financial markets, a precondition for development.
In Geneva at the Social Summit, one hundred and sixty governments agreed to a UN study on financing for development which was to include analysis on currency transactions taxes. To date, this study has not yet begun. We strongly recommend that the study be undertaken immediately and be completed prior to the Financing for Development conference in Monterrey in order to make a meaningful contribution to the FfD process. The final outcome of the FfD must not be yet another call for a study.
The United Nations is a forum for fair, open and honest dialogue, debate and discussion. One of the newest and most innovative means to both finance development and to address the systemic volatility of the financial system is before you. We urge that you do not let this critical opportunity pass.
More Information on Social and Economic Policy
More Information on the Preparation of the Financing for Development Summit
More Information on Financing for Development
More Information on Currency Transaction Taxes
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