Opinion: Protracted Stagnation Threatens International Solidarity, Development

• by Jomo Kwame Sundaram 2 (rome)
• Wednesday, September 16, 2015
• Inter Press Service

The Conference on Financing for Development held in Addis Ababa in July was the first test of the degree of commitment to endow the new agenda with the means needed to meet the level of ambition. The Addis Ababa Action Agenda (AAAA) by and large reiterated commitments made towards the outgoing MDG agenda.

A more ambitious and reinvigorated global partnership is definitely needed. The protracted economic stagnation and continued austerity in rich countries do not augur well.

The track record of global partnership under the present MDG agenda has been rather disappointing, to say the least, even during better years before the financial crisis of 2008-2009.

The United Nations annual MDG Gap Reports, including the recently released 2015 report, highlighted several shortfalls in international efforts to achieve the MDGs, providing sobering reminders of the need to substantially step up efforts to meet longstanding international commitments.

Over four and a half decades ago, the international community committed to transfer 0.7 percent of the gross national income (GNI) of rich countries to poor countries in the form of official development assistance (ODA), or aid.

After falling in the 1990s following the end of the Cold War, the volume of ODA has increased by two thirds (66 percent) in real terms since 2000, reaching USD135 billion in 2014. Yet, this represented only 0.29 percent of donor country GNI, less than half of what was promised, implying a shortfall of USD191billion.

At least 0.15 percent of donor GNI (USD70 billion) should have gone to the least developed countries (LDCs). Instead, in 2014, about USD45 billion – or barely 0.10 percent, or two thirds of the share promised – actually reached the LDCs, a shortfall of at least USD22 billion.

At the Gleneagles summit, the G8 leaders promised to increase annual ODA to Africa by USD 25 billion to USD64 billon (in 2004 prices). Actual delivery has fallen short by USD18 billion per year – a 72 percent gap between promise and delivery!

Aid effectiveness

While falling short of promises, aid has provided a relatively stable international flow, and been critical for some of the stronger growth performances in Africa in recent years, especially when used for improving infrastructure and boosting agriculture.

Much bilateral ODA used to be tied, or for donor projects, rather than for budget support. Tied aid often means paying too much for overpriced goods and services from the ‘donor' country, including unnecessary or unwanted technical assistance.

Some progress was made in untying aid during the 1990s. This came to a virtual halt from the start of the new millennium with the share of untied aid provided by OECD-DAC donor countries increasing only slightly from 80 percent to 83 percent between 2000 and 2013.

Only meagre progress has been made in enhancing budget support and lowering increasingly fragmented project aid. Hence, a large share of aid continues be allocated following donor priorities, thereby limiting policy space and effective national ownership for recipients.

Debt

The main success story over the last decade probably involves debt sustainability: there was significant progress with the heavily indebted poor countries (HIPC) initiative and the supplementary multilateral debt relief initiative (MDRI).

Unfortunately, however, debt relief is still not treated as additional to ODA, in effect resulting in ‘double counting' – the first time as a concessional loan, and then, as a debt write-off. Consequently, actual resource transfers are often significantly less than reported ODA, much of which goes to servicing existing debt.

External debt ratios for developing countries as a whole continue to decline, although the ratio is higher for low-income countries following the 2008-2009 crisis. Though levels are higher now than around 2000, most are not considered dangerously high. However, this situation may well worsen with the continuing collapse of primary commodity prices beginning in the last year.

A few heavily indebted poor countries (HIPCs) are approaching high levels of debt distress, with most concern over debt in many small-island developing states (SIDS), especially in the Caribbean, facing external debt ratios well over 100%.

Over the past fifteen years, the spate of sovereign debt crises has also involved much better off countries, most notably Argentina, Iceland and Greece, underscoring the need for the international community to develop an equitable and effective sovereign debt workout framework.

Trade preferences

The 2001 LDCs summit at Brussels committed the international community to ensuring100 percent duty-free quota-free (DFQF) access for LDC exports. In practice, the share (excluding arms) increased from about 75% in 2000 to around 90% a decade ago, to drop again to 84 percent in 2014.

Guaranteed access is only available for 80 percent of product lines. However, any target short of 100 percent would allow importing countries to exclude those product lines which LDCs can successfully export.

Access to technology

Affordable and equitable access to new technologies will be increasingly crucial for human progress and sustainable development in many areas, including enhancing food security as well as climate change mitigation and adaptation.

The decline of public sector research and extension efforts, the strengthening of intellectual property rights claims and the correspondingly greater private control of technologies – all have ominous implications for the poor who cannot afford access.

Progress towards ensuring affordable access to generic essential medicines has been modest, with evidence varying considerably. During 2007-2014, such medicines were only available in 58% of public facilities and 67 percent of private facilities. Compared to international reference prices, the average cost of these medicines were about 5.7 times higher in lower-middle income countries, and three times in low-income countries.

This poor track record should put some pressure on the ongoing discussion about the ‘means of implementation' to facilitate achievement of the post-2015 Sustainable Development Goals (SDGs).

The AAAA – that was expected to ensure the means for implementation of the new global partnership to achieve these ambitious goals – does not suggest any great eagerness by development partners to rise to the challenge.

If the agreement on the SDGs, AAAA and Agenda 2030 has been sincere, then it is essential to mobilize the means on a much greater scale to achieve the promise of a more inclusive and sustainable, poverty and hunger-free world.

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service.

© Inter Press Service (2015) — All Rights ReservedOriginal source: Inter Press Service

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