Addis Ababa: July 21, 2015 – With media attention focused on the Iran nuclear agreement and the Greek bailout, it was easy to miss the other major international accord negotiated last week: the “Outcome Document” of the Third International Conference on Financing for Development, held in Addis Ababa, Ethiopia. Despite its abstruse title, the high-level conference was one of major significance, with three key messages for Congress:
1. Talk is cheap, but progress has costs. In September, the United Nations will convene a summit where nations are expected to adopt an ambitious set of 17 global goals to be reached by 2030, known as the Sustainable Development Goals (SDGs). They include eradicating extreme poverty, ending hunger, eliminating preventable child deaths, attaining gender equality, ensuring universal primary and secondary education, and achieving universal access to safe drinking water and sanitation. This conference was a recognition that before making commitments to achieve major development gains, the world must figure out a way to pay for them. Addis was not a pledging conference, but it attempted to identify how and where those resources will be found.
2. It’s not all about aid. Official development assistance is a small and shrinking proportion of financial flows into developing countries — around $161 billion as compared to $341 billion in private remittances and $928 billion in foreign direct investment — and all these inflows are small in comparison to funds raised within developing countries themselves: $3.7 trillion in domestic private investment and $5.5 trillion in domestic government revenues. What figured most prominently on the Addis agenda was the need for developing countries to raise more of their own domestic resources and invest them in the well-being of their people. To this end, the United States announced an initiative to help developing countries improve the transparency, fairness and efficiency of their tax systems, so long as those countries apply their new capacities toward attaining the SDGs and inclusive development. The Addis Tax Initiative was signed by 30 countries and international organizations.
3. Everyone has a role to play. Developing countries agreed to “strengthen our domestic enabling environments, including the rule of law, and combat corruption at all levels and in all its forms.” Specifically, they affirmed the importance of promoting entrepreneurship and creating regulatory environments that are open and non-discriminatory. Businesses were called upon “to apply their creativity and innovation to solving sustainable development challenges” and “to engage as partners in the development process.” Civil society vowed to hold governments accountable for their performance, aided by more open data and more inclusive decision-making processes. And international donors acknowledged that the SDGs will require scaled-up and more effective aid, focused on those in greatest need.
Many civil society groups were disappointed that the agreements at Addis did not go further, and that the commitments were vague and nonbinding. They had pushed for the creation of a new U.N. body to address tax evasion and avoidance, which the United States and other developed countries resisted.
But even if the outcome wasn’t all that observers hoped it would be, it was an important step toward changing the conversation around development finance. It doesn’t give Congress a pass on increasing the quantity and quality of development assistance, but it does provide reassurance that others will join us in stepping up to the plate.
Ohlbaum is an independent consultant, co-chair of the Accountability Working Group of the Modernizing Foreign Assistance Network and a principal of Turner4D, a strategic communications firm.