Innovative financing for development/B_descRubAff1>
The Leading Group on Innovative Financing for Development, created in 2006, is the major forum for discussion and exchange of best practices in the area of innovative financing. Today counting 64 countries, international organizations, NGOs and foundations among its members, the Leading Group aims to promote innovative financing for development, rally international mobilization around these challenges and encourage pilot projects.
Leading Group Member Countries: Algeria, Austria, Bangladesh, Belgium, Benin, Bhutan, Brazil, Burkina Faso, Burundi, Cambodia, Cameroon, Cap Verde, Central African Republic, Chile, China, Congo, Côte d’Ivoire, Cyprus, Djibouti, Ecuador, Egypt, Ethiopia, Finland, France, Gabon, Germany, Guatemala, Guinea, Guinea-Bissau, Haiti, India, Italy, Japan, Jordan, Lebanon, Liberia, Luxembourg, Madagascar, Mali, Morocco, Mauritius, Mauritania, Mexico, Mozambique, Namibia, Netherlands, Nicaragua, Niger, Nigeria, Norway, Poland, Romania, Russia, Saudi Arabia, Sao Tome and Principe, Senegal, Sierra Leone, South Africa, South Korea, Spain, Sri Lanka, Togo, United Kingdom and Uruguay.
Role of the Permanent Secretariat and the rotating Presidency
The Leading Group is chaired every six months by a different country. Since March 2013, the Leading Group is chaired by Nigeria.
The Presidency is designated by consensus based on a principle of geographic rotation. Holding the Presidency of the Leading Group implies playing the role of a leader in promoting innovative financing for development, particularly within the United Nations system.
The Leading Group’s Permanent Secretariat is based in Paris at the French Ministry of Foreign Affairs. It leads the Group’s work programme, sets the calendar of events, ensures the communication between member States and helps the different Presidencies organize the plenary sessions and high-level events.
Levy on air tickets and UNITAID
Idea : raise a small levy on air tickets (compulsory contribution by each passenger levied by a State at the time of the ticket’s purchase) to support the financing of heath projects (UNITAID and Global Fund).
As a drug purchasing facility, UNITAID enjoys a market power that enables it to negotiate significant price cuts with pharmaceutical companies. More than 80% of UNITAID funds are for low-income countries.
Participants:Benin, Cameroon, Chile, Congo, France, Jordan, Madagascar, Mali, Mauritius, Niger, Norway, South Korea.
Results: support for the Global Fund and UNITAID (US$1.09 billion since 2006), development of new products (antiretrovirals for children), lower drug prices and supplying of medicines.
IFFIm (International Finance Facility for Immunization)
Idea: IFFIm is a UK company that issues vaccine bonds in financial markets on a regular basis thanks to multi-annual pledges from a number of governments. The funds raised by IFFIm are paid to GAVI (Global Alliance for Vaccines and Immunization) to which are delegated administrative functions and field implementation of immunization initiatives financed by the funds raised.
Participants: United Kingdom (£1.9 billion over 20 years), France ($1.7 billion over 20 years), Italy ($601 million over 20 years), Australia ($256m over 20 years), Norway ($264m over 15 years), Spain ($240m over 20 years), Netherlands ($114m over 8 years), Sweden ($38m over 15 years), South Africa ($20m over 20 years), Brazil ($20m over 20 years).
Results: IFFIm has raised $3.4 billion to date, thus enabling GAVI to double funding for immunization programmes.
AMC (Advanced Market Commitments)
Idea: The AMC is a mechanism based on contractual partnerships between donor countries and pharmaceutical companies. By making financial commitments, donor countries guarantee future purchases of vaccines from companies, enabling them to finance research for their development. Companies undertake to market products at affordable prices for consumers and target countries.
The World Bank receives payments for covering financial risks. Multilateral management is carried out through the GAVI Board to which those funds are subsequently paid. GAVI is responsible for the management of partnerships with pharmaceutical laboratories.
Participants:Italy, United Kingdom, Canada, Norway, Russia, Gates Foundation.
Results:The AMC has raised $1.45 billion to date and aims to accelerate the development and production of vaccines through investment guaranteeing the price of vaccines once they are developed. Introduce immunization in 40 countries and save 7 million lives by 2030.
Debt management mechanisms (Debt2Health initiative)
Idea: help increase investment for development in beneficiary countries through conversion of their debt.
This mechanism is based on a partnership between two countries (a donor and a partner country). The donor country cancels the debt of the partner country subject to the sum being re-invested in an initiative for the development of health infrastructure in the partner country via the Global Fund to Fight AIDS, Tuberculosis and Malaria. The sum corresponding to the cancelled debt is mandatorily reserved for the Global Fund by the partner country.
Participants: Germany with Indonesia (€50 million), Pakistan (€40m) and Côte d’Ivoire (€19m); Australia with Indonesia (€54.6m); France with Madagascar (€20m) and Cameroon ($25m); the United States with Peru ($40m).
Results: financing of tuberculosis prevention projects.
Financial Transaction Tax (FTT)
Idea: the financial transaction tax (FTT) – initially suggested by James Tobin in 1972 as an anti-speculation tool – has reached the forefront of international debate in recent years, particularly within the G20 under its French Presidency. As a pioneering country in the promotion of innovative development financing, France makes the case for the implementation of a financial transaction tax in support of global development.
An FTT was introduced in France on 1 August 2012. It applies to transactions of shares of listed French companies whose market capitalization exceeds €1 billion (0.2%), as well as to high-frequency trading and insurance contracts against government default risk (0.02%).
As the 27 Member States failed to reach agreement on the proposed European FTT, a group of 11 EU Member States (Germany, France, Spain, Italy, Belgium, Portugal, Greece, Austria, Estonia, Slovenia and Slovakia) was formed to adopt an FTT through enhanced cooperation. This project, which was endorsed in January 2013 by the Economic and Financial Affairs Council (ECOFIN), is currently being negotiated with a view to adoption during 2014. The Development Ministers of Germany, Belgium and France are mobilizing to support allocating part of the FTT proceeds to development.
Participants: France, at national level.
The proposed European FTT is backed by 11 countries: Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
Results: a total of €648 million was raised in a year. The French President pledged that 10% of the proceeds from the French FTT would be allocated to global actions in the fields of climate and health. In 2013, priority was given to health care access initiatives for Sahel’s children (Solidarity-Health-Sahel (I3S) initiative).
The existing innovative financing mechanisms established by some 20 countries have helped raise more than €6 billion since 2006. The “scaling up” advocated in the Doha Declaration on Financing for Development in 2008 is still required, however, to achieve a greater impact on development finance.
March 2002 Monterrey Consensus on Financing for Development
Introduced in the international debate at the time of the 2002 Monterrey Conference, the notion of innovative financing designates mechanisms that generate new resources for development supplementing traditional official assistance. These mechanisms also help optimize existing resources through a leverage effect by combining public and private funds. They are established on a voluntary basis by countries with varying levels of development and based on new partnerships (local and international public and private actors).
Paragraph 44: “We recognize the value of exploring innovative sources of finance provided that those sources do not unduly burden developing countries.”
2008 Doha Declaration
The Doha Declaration acknowledges the progress made in terms of poverty reduction and economic and social policies. Above all, the Declaration underlines emerging challenges: the financial crisis and global economic slowdown and volatility of key commodity prices; but it also emphasizes the serious consequences of climate change.
The Declaration also takes account of international cooperation issues by reaffirming commitments to increase the volume of official development assistance (ODA) and recognizing the principles adopted in terms of more effective and efficient aid delivery.
Lastly, it underlines the success of initial innovative finance initiatives:
Paragraph 51: “We recognize the considerable progress made since the Monterrey Conference in voluntary innovative sources of finance and innovative programmes linked to them. […] We encourage the scaling up and the implementation, where appropriate, of innovative sources of finance initiatives.
December 2010 UNGA resolution on innovative mechanisms of financing for development
Resolution 65/146 adopted by the United Nations General Assembly in December 2010 at the instigation of Brazil confirmed the importance of innovative mechanisms of financing for development:
“4. … innovative mechanisms of financing can make a positive contribution in assisting developing countries in mobilizing additional resources for development on a stable, predictable and voluntary basis.”
June 2012 Rio Declaration: The Future we want
The Rio Outcome document has stressed in paragraph 267 the role played by innovative financing and confirmed support by the United Nations for the Leading Group’s work in support of scaling up innovative financing to help reduce poverty.
“267. We consider that innovative financing mechanisms can make a positive contribution in assisting developing countries to mobilize additional resources for financing for development on a voluntary basis. Such financing should supplement and not be a substitute for traditional sources of financing. While recognizing the considerable progress in innovative sources of financing for development, we call for a scaling-up of present initiatives, where appropriate.”
For further information: