Events in the international community

Monterrey Consensus text
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International Conference on Financing for Development

Monterrey, Mexico, 18-22 March 2002

The International Conference on Financing for Development was attended by more than 50 heads of State, over 200 finance, foreign, trade and development cooperation and other ministers, and some 6,000 participants. The Conference stimulated an overall view of many aspects of domestic resource mobilization, foreign direct investment, trade, good governance, official development assistance and debt relief. It also provided a forum for discussion of other issues such as financial stability, cooperation on domestic tax matters between countries, and new and innovative sources of financing. In this regard, one of the main features of this event was the holding of various high-level round tables as part of the official setting of the Conference. These round tables focused on partnerships in financing development and coherence in development. Participants also discussed future orientations for financing for development (FfD).

Another important feature was the announcement by many donor countries of increases in Official Development Assistance (ODA). The EU informed the Conference of its collective decision to increase average ODA to 0.39 % of GDP by 2006, with all member countries aiming for a minimum of 0.33 % by the same year. The US plans to start increasing current ODA of U$ 10 billion quickly and by US$ 1.6 billion in 2004, 3.2 billion in 2005, and 5 billion in 2006, and to maintain that level. These announcements should represent a total increase in ODA of approximately US$ 12-13 billion a year by 2006.

In their final document (the “Monterrey Consensus”), the heads of State recognize the need for concerted and coordinated actions on all of the critical FfD agenda items (debt relief, ODA, market access, global economic governance). In addressing systemic issues, with a view to enhancing the coherence and consistency of the international system, they explicitly support the ILO and encourage its ongoing work on the social dimension of globalization. In so doing, they recognize the importance of integrating the social dimension into the formulation of economic and financial policies and hence highlight the need for an enhanced role for the ILO in the governance structure of the global economy. The document also contains many other elements of interest to the ILO, including references to employment creation; labour rights; social protection, including the need to further strengthen its coverage and scope; active labour market policies and worker training; micro-finance and credit for SMEs; pension schemes; migrant workers; social budget policies; the role of foreign direct investment in job creation; and corporate social responsibility.

Report of the Secretary-General

The report reviews the major issues to be addressed by the Conference and proposes a large number of ensuing recommendations. It drew upon the work of various inter-agency task forces and public “hearings” organized by the secretariat. It is very wide-ranging, covering all the major potential sources of financing for development, and deals with issues related to the mobilization of domestic resources for development, FDI and other private financial flows, trade, ODA, debt relief, and the systemic issues involved in ensuring coherence and consistency in mobilizing these sources of finance for development. Its recommendations call for more coherent and participatory economic governance at both the national and international level, efforts to achieve higher and more evenly spread levels of foreign direct investment to developing countries, greater market access for developing countries in the next round of multilateral trade negotiations, increased levels of official development assistance (including specific funding for global public goods), enhanced debt relief, and the strengthening of the role of the United Nations in ensuring more coherent and democratic governance of the global economy.

Many of the recommendations are in line with ILO positions on development and international policy. On national policy it recommends that national macroeconomic policies should aim at a medium-term framework that balances the key objectives of sustained economic growth, employment growth and poverty reduction. It calls for the strengthening of the institutional arrangements that bring the main elements of macroeconomic policy into the public domain so that the full consequences of these policies, including their social dimensions, can be discussed.

The recommendations on national policies also recognize the importance of micro-finance and the key role of small and medium enterprises in promoting economic growth and employment. Similarly, the need to increase the allocation of national resources for social protection and to mobilize resources to extend social protection to those working in the informal economy and those performing unpaid work is recognized. On systemic issues, it recognizes the importance of integrating the social dimension into the formulation of economic and financial policies. For example, in discussing the strengthening of the international financial architecture, it calls on countries to provide a system of social protection that is strengthened at the same pace as the country’s increasing integration into the global economy, and notes that this national imperative is also desirable from the perspective of the international financial system. It also urges the Conference to reiterate that internationally supported adjustment programmes should be employment- and growth-oriented and should minimize the social costs of adjustment.

Internet: http://www.un.org/esa/ffd/aac257_12E.htm

Report of the High-Level Panel on Financing for Development (“Zedillo Report”)

In December 2000 the UN Secretary-General appointed a Panel to recommend strategies for the mobilization of resources to accelerate equitable and sustainable growth in developing countries. He asked Mr. Ernesto Zedillo, the former President of Mexico, to chair the Panel. The High-Level Panel on Financing for Development included ten other respected personalities. The Panel issued a report as a contribution to the preparatory process of the International Conference on Financing for Development.

This report contains a number of recommendations which were to be considered by the Preparatory Committee for the Conference in October this year, as well as by the Conference itself (Monterrey, Mexico, 18-22 March 2002). It states that the increasing polarization between the haves and have-nots has become a feature of our world and that in the global village, someone else’s poverty very soon becomes one’s own problem. There are several hopeful signs that the international community has begun to acknowledge this reality, and the report refers in particular to the outcome of the UN Millennium Summit, including the commitment to halve the proportion of people living in extreme poverty by 2015.

The High-level Panel considers that every developing country needs to set its economic fundamentals in order, including the establishment of a regulatory environment that effectively protects workers’ rights. It urges the international community to launch a Development Round, with the principal objective of fully integrating the developing countries into the global trading system. The Panel also calls for the endorsement of the proposal by the Commission on Global Governance to create a global council at the highest political level to provide leadership on issues of global governance, and proposes a Globalization Summit to discuss this issue further that would convene a group of heads of State to address the key governance challenges of globalization. The Conference should explore the desirability of securing an adequate international tax source to finance the supply of global public goods, and further rigorous study would be needed on a currency transactions tax. A better possibility would be to impose a minimum level of taxation on the consumption of fossil fuels (a carbon tax) as a way of combating global warming. They also call on the international community to consider the potential benefits of an international tax organization, stressing that this could address many needs that have arisen as globalization has progressively undermined the territoriality principle on which traditional tax codes are based.

In a subsection entitled “Institutional response to environmental and labour issues” the authors stress that various international organizations have been under huge and frequently conflicting pressures to address legitimate environmental and labour issues raised by civil society interests. With its capacity to impose sanctions, WTO has been the most attractive target for such pressure. They believe that, to a large extent, this situation reflects the lack of global instruments capable of responding adequately to the labour and environmental concerns that are raised. To deflect pressure from WTO and provide a more adequate forum for the development and enforcement of labour and environmental standards, they propose that serious consideration should be given to strengthening the ILO by providing it with instruments to enforce its standards. The Organization should be quicker than it has been to condemn governments that violate its Conventions, and it should be able to impose economic sanctions, perhaps in the form of fines, on persistent offenders. Reform of the ILO needs more careful thought than the Panel has been able to give to the issue, and another Panel could be charged specifically with developing concrete proposals for its reform. Members of the Panel also refer to pension systems, stressing that if a pension system is to add to national saving, it must be a funded, and not a pay-as-you-go system, and the transition to the funded system must not be financed by borrowing.

Internet: http://www.un.org/esa/ffd/a55-1000.pdf (Acrobat)