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LDCs and Their “Graduation”

15. November 2022 - 23:23

By Alexa Sabatini, Julie Kim, Barbara Adams, and Karen Judd

Download this briefing (pdf version).

“Leave no one behind – these four words are the promise at the heart of the 2030 agenda for Sustainable Development. This is the principle this UN body committed to… Today, not only do smaller Nations and younger democracies like Malawi still feel left behind but feel much farther behind than before.”

Lazarus Chakwera, President of Malawi at the 77th UNGA General Debate

The UN established the category of least developed countries (LDCs) in 1971, as many developing countries were navigating a path to development in the post-colonial period. The classification identified specific development challenges faced by these countries. As the UN ECOSOC Committee for Development Planning (renamed in 1998 Committee for Development Policy – CDP) acknowledged in 1971:

“[w]hile developing countries as a group face more or less the same general problems of underdevelopment, the difference between the poorest and the relatively more advanced among them is quite substantial…. The least developed among them cannot always be expected to benefit fully or automatically from such general measures adopted in favour of all developing countries. Some special supplementary measures are therefore called for to remove the handicaps which limit the ability of the least developed countries to derive significant advantages from the Second United Nations Development Decade.”

Criteria for the LDC classification and to “graduate” out of that classification have evolved over the last 50 years, as has the number of countries so designated. The path to graduation has become, implicitly and explicitly, a measure of successful development. There have been different iterations of graduation criteria, with multivariate indices to better capture the complexity of development progress in LDCs. The evolution continues as the CDP – primarily responsible for determining these criteria – adopted a work plan to evaluate the process at its 2022 annual meeting. The CDP is a 24-member subsidiary body of the United Nations Economic and Social Council (ECOSOC) set up to provide independent advice to the Council on development policy issues.

Concomitantly, UN Member States adopted the fifth decade-long blueprint for LDC development in March 2022: the Doha Programme of Action (DPoA). To address the graduation challenges, the DPoA established targets that “i. enable 15 additional LDCs to meet the criteria for graduation by 2031. ii. Improve the scope, where necessary, and use of smooth transition measures and incentives for all graduating LDCs. iii. Provide specific support measures to recently graduated countries for making the graduation sustainable and irreversible” (para 312). It also welcomed the establishment of a Sustainable Graduation Support Facility “as a concrete country-led solution of dedicated capacity development support” (para 319).

To date, there have been four UN conferences to support LDC development. The fifth LDC Conference (LDC5) scheduled to take place in Doha, Qatar in January 2022 was split into two parts due to the impact of COVID-19: 17 March 2022 for the formal adoption of the DPoA and 5-9 March 2023 for the five-day conference in Doha. The rescheduled fifth LDC Conference in 2023 provides a timely occasion to plan a quality review of the implementation of the DPoA that extends beyond ticking off a mid-term checklist as well as evaluating the relevance and quality of the metrics used, and support required on the path to graduation.

This briefing is a backgrounder on the dynamics of the graduation process from the LDC category. It addresses the developments, challenges and possible next steps of a process that provides either a path or a roadblock for sustainable development in LDCs.

Six key focus areas of the Doha Programme of Action to support sustainable graduation:

  • Eradicating poverty and building capacity to leave no one behind
  • Leveraging the power of science, technology, and innovation to fight against multidimensional vulnerabilities and to achieve the Sustainable Development Goals
  • Supporting structural transformation as a driver of prosperity
  • Enhancing International trade of least developed countries and regional integration
  • Addressing climate change, environmental degradation, recovering from the COVID-19 pandemic, and building resilience against future shocks for risk-informed sustainable development
  • Mobilizing international solidarity, reinvigorated global partnerships and innovative tools and instruments: a march towards sustainable graduation

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When the LDC category was created in 1971, the number of LDC countries defined as those with GNI below US $2018 was 25. By 2003, the number had grown to 50, and soon thereafter to 52. By 2020, only six countries had graduated: Vanuatu (2020), Equatorial Guinea (2017), Samoa (2014), Maldives (2011), Cabo Verde (2007) and Botswana (1994), leaving 46 countries still in the group. Over the last two decades, LDCs have made considerable progress in reducing poverty and improving structural development. LDCs have also implemented effective policies to prevent the severe spread of COVID-19 within their countries.

The 2021 State of the LDCs OHRLLS Report outlined progress LDCs had made in a number of target areas of the Istanbul Programme of Action (IPoA), that was adopted in 2011. These include: access to information and communications technology (ICTs); sustainable energy; health; education; gender; and governance. However, the pandemic hampered the development gains of the IPoA, along with the progress toward graduation. Additionally, a number of targets remain unmet, with gaps between the LDCs and other developing countries continuing to increase, calling into question the very definition of development and the concept and criteria of their graduation.

LDC Designation and Graduation

The CDP, mandated since 1998 to review the progress of LDCs and determine graduation readiness, undertakes such a review triennially. Following a comprehensive review in 2020, the CDP refined LDC graduation criteria so that currently, LDCs must meet a HAI of 66 or above, an EVI of 32 or below, a GNI per capita of US$1,230 or above (US$2,460 for an income only criterion), across two triennial reviews to qualify for graduation. Graduation does not have to be approved by the LDCs but does take country concerns into consideration.

International Support Measures for LDCs

Unlike the Low-Income Countries designation of the Bretton Woods Institutions, the UN category approach includes commitments of the LDCs, and crucially, of their “development partners” in the form of International Support Measures (ISMs). LDC specific support measures are centered on three targets: international trade, development cooperation, and participation in international forums. Following are some of the support measures which graduation from the LDC category impacts, altering the amount and types of support offered during and after graduation.

  • Official Development Assistance (ODA) is a critical source of external financing for LDCs, and for many of them the largest source of external public finance. However, commitments have consistently been unmet and, according to UNCTAD, reduce “aid effectiveness and the building of LDC state capacity to deliver on the PoAs and other development goals”. As described in the CDP’s Handbook on LDCs, “ODA includes grants, ‘soft’ loans and the provision of technical assistance, and can be provided bilaterally, from donor to recipient, or channelled through multilateral organizations such as the United Nations or the World Bank. LDCs received 24 per cent of total ODA disbursed by DAC countries in 2018-2019.” Nevertheless, the quantity and quality of commitments varies markedly from the providers of ODA, affecting the grant element and untied aid, for example.
  • The United Nations Development Fund (UNDF provides several financial resources dedicated to LDCs; however, graduation can affect the amount and loan terms of these resources as well.
  • Countries will lose access to the LDC Fund under the Global Environmental Facility upon graduation, reducing their access to climate financing.
  • Graduating LDCs are also expected to transition out of the Global Alliance for Vaccines and Immunization: Angola and Bhutan, expected to graduate in 2024, have already transitioned out of the Global Alliance, while São Tomé and Príncipe and the Solomon Islands are in the alliance’s accelerated transition phase.
  • The Technology Bank for LDCs, established in 2018, assists countries in the production of research, capacity development and strengthening academies of science within LDCs. Graduating countries lose access to the bank after five years.
  • The Enhanced Integrated Framework (EIF) supports LDCs by providing assistance in national planning and implementation strategies that build trade capacities that drive development and facilitate a smooth integration into the global trading system. Like the Technology Bank, graduating LDCs lose access to EIF support after a five-year period, on top of the phasing out of preferential treatments under WTO rules, such as duty-free and quota-free market access.
  • The United Nations Capital Development Fund (UNCDF) offers LDCs “last mile” finance methods to unlock public and private resources to support economic development. Post-graduation, UNCDF financing is provided for another three years. UN organizations and conventions ensure that LDCs are eligible for travel benefits to maintain their participation in LDC processes; but these too are limited to three years after graduation.

COVID-19 and LDC Graduation

According to UNCTAD’s 2021 LDC Report, “[as] the economies of ODCs [other developing countries] and developed countries recover from the pandemic shock, many LDCs risk being left behind… and face a risk of a lost decade of development and of remaining on the margins of the global economy. They may spend the coming years just trying to recover from the COVID-19 shock and eventually achieve little real progress on the Sustainable Development Goals during the 2020s.”

In light of the ongoing COVID-19 pandemic, the CDP in their 2021 triennial review approved an additional five-year preparatory period for four countries scheduled to graduate from the LDC category: Bhutan in 2023, and Angola, São Tomé and Príncipe and Solomon Islands in 2024. The five-year extension will allow for a fuller analysis in the 2024 triennial review, on the effectiveness of this period in managing the impact of the pandemic, or whether another extension is needed. The CDP identified Bangladesh, Lao People’s Democratic Republic and Nepal for graduation in 2026, but recommended deferral of Myanmar and Timor-Leste until 2024. Similarly, while the CDP endorsed Kiribati and Tuvalu for graduation, ECOSOC deferred decision until 2024. Cambodia, Comoros, Djibouti, Senega and Zambia all met the graduation criteria for the first time; if they meet the thresholds for a second triennial review in 2024, they will be considered for graduation by the CDP.

Despite the lack of data on the full impact of the pandemic, neither ECOSOC nor the CDP had originally postponed the 2021 Triennial Review. In an October 2020 letter, Third World Network, a global civil society organization based in Malaysia, urged Ambassador Ligoya of Malawi to request a deferral for the 2021 CDP Triennial Review. The letter highlighted “the gigantic impact of the crisis and the inability to assess the totality of impacts at this point, [making] the Review rather presumptive and at the least unscientific. The review will be based on data up to 2019 with, at best, limited data on COVID-19 impacts in 2020. This will not even begin to catch the full impact of the crisis on LDCs that may be recommended for graduation.”

To address the pandemic’s lopsided impacts on LDCs found in its 2021 Triennial Review, the CDP identified three critical adjustments for successful graduation amid the crisis: an extended preparatory period of five years to address the health and economic impacts; a review of the pandemic’s impact on each LDC; and additional international assistance, including the extension of LDC support measures, addressing the effects of the pandemic, and increasing capacity building.

The CDP subsequently conducted a comprehensive study on the impacts of the pandemic on LDCs and concluded that “significant negative impacts of the pandemic must be factored into the graduation process” to address additional demands that arise during planning, interruptions to ongoing structural transformation processes, and LDC specific international support measures, both existing and new, in which development partners play an important role.

Continued Evolution of the Graduation Process

In the current graduation process, when a country is identified for graduation eligibility, UNCTAD drafts a country vulnerability profile and DESA prepares an ex-ante impact assessment. The CDP then consolidates the reports into one assessment, taking into account the LDC criteria and country-specific factors. The CDP also determines the length of the preparatory period before graduation, recommends priorities and the type of support needed for a smooth transition to be confirmed by ECOSOC. During years 3-6 of the graduation process, the country finalizes and implements its smooth transition strategy and reports to the CDP. After year 6, graduation becomes effective, and the country is no longer classified as an LDC. Following graduation, the country will continue to monitor its transition strategy and report back to the CDP annually for the first three years and triennially after two triennial reviews.

Both LDCs and UN entities recognize the importance of international development support during this crucial period. OHRLLS established the UN Inter-Agency Task Force (IATF) in 2017 for LDC graduation, which works in collaboration with other UN agencies and international organizations. To assist LDCs to adapt development strategies and minimize risks of premature graduation, IATF called on development partners to strengthen aid mechanisms for transition that prevents deviation from graduation trajectories. It emphasizes the need to guarantee that the country’s transition is aligned not only with its development strategy, but also its development situation.

However, in the lead-up to LDC5, LDCs consistently expressed their concerns about losing LDC specific support measures post-graduation. In November 2020, the Group of LDCs submitted a proposal (WT/GC/W/807) to the WTO General Council for the creation of an effective smooth transition mechanism (STM) for graduating countries. The proposal calls for a 12-year extension of LDC-oriented technical assistance, capacity building programmes, and facilities that are provided under the WTO system for graduated countries. Smooth transition strategies are a critical tool for ensuring a sustainable graduation. They identify the loss of LDC benefits, such as interest-free loans and trade preferences, and effective responses to crisis situations, and then adjust institutional and legal frameworks to align with international obligations. STMs are, however, still limited as they do not extend existing support mechanisms to assist graduating LDCs.

Special & Differential Treatment at the WTO

[The] Group of 90 developing and least-developed countries expressed grave alarm at the World Trade Organization on 23 September over continued “disengagement” by the major developed countries on improving special and differential treatment (S&DT) for realizing their development goals. [At] a time when the gains made by most of their economies are being reversed because of the “poly crises,” there has been no constructive engagement by the major industrialized countries. [They] are now forced to “contend with external shocks such as rocketing inflation, and the food and energy crises, and balance of payment challenges, among a host of threats to their economic recovery and development aspirations.”

“This confluence of global economic shocks will disproportionately affect developing countries, including LDCs, for decades to come,” the G90 countries argued.

The group said that “the Ministers’ commitment at the Twelfth Session of the Ministerial Conference of the WTO (MC12) and an objective appreciation of the current global economic environment and its challenges provides an opportunity for WTO Members to frankly reflect on the efficacy of policy tools within WTO agreements and to ask the all-important question whether they are congruent with the commonly stated desire to ensure that …trade be conducted with a view to raising standards of living, ensuring full employment, pursuing sustainable development of Members, and enhancing the means for doing so in a manner consistent with Members’ respective needs and concerns at different levels of economic development”.

(Excerpts from TWN SUNS #9655 dated 28 September 2022)

UNCTAD maintains that development continues beyond graduation, and that development success is tied to the foundations that countries are able to create during their graduation phase. It asserts that pre- and post-graduation strategies must be synchronized to promote a sustainable graduation and long-term development. In its 2021 Strategy for Graduation with Momentum (SGM), UNCTAD proposed a new objective policy framework for graduation strategies, as well as a new timeframe for the implementation of the strategy. The SGM is centered on three elements: expanding productive capacities; fostering structural transformation; and catching-up with developed countries. The SGM aims to counter the growing gap between LDCs and ODCs.

The CDP also upholds the need for development and trading partners to extend LDC specific support, phase-out measures gradually, and provide assistance throughout the entire graduation and smooth transition process to mitigate existing challenges that often continue after graduation. It recommends that trading partners consider market access alternatives, like free trade agreements and preferential market access arrangements, to continue post-graduation, and extend specific measures for graduating nations through bilateral and regional trading agreements.

The Productive Capacities Index and UNCTAD

In February 2021, UNCTAD developed the Productive Capacities Index (PCI) to support productive capacity building in developing countries. The PCI scores a country’s development capacities by analysing its effective strategies. As a multi-dimensional index, the PCI aims to support the implementation of holistic and evidence-based policies, while considering the effectiveness of previous policies. It identifies gaps and limitations that hinder productive capacity building and structural transformation in LDCs. The index considers: human capital, natural capital, energy, transport, ICTs, institutions, private sector, and structural change.

An August 2021 UNCTAD Policy Briefing detailed the role of institutions in capacity building. To support strong institutions and policies in LDCs, the paper advocated for: institutional tools to implement effective policies, utilizing the PCI to monitor development progress, conduct gap assessments, increase efforts for institution building, establish advisory bodies on policy formulation, improve public and private sector collaboration, foster greater inclusion of non-governmental actors in policy development, and increase institutional coordination.

(For the latest from UNCTAD: LDC Report 2022)

A CDP background paper on working towards a resilience building framework further highlighted the need for better monitoring of graduating and graduated countries, urging that HAI and EVI be maintained as Crisis Vulnerability Assessment (CVA) indicators to guide decision making throughout the graduation process. It called for enhanced monitoring of pandemic effects in graduated countries and strengthened support for the graduation process, including establishing a crisis response and management mechanism, and rapporteurs for each graduating and graduated country.

The Secretary-General in a 2021 report addressed these two concerns regarding STMs and monitoring. The report identified the need for technical assistance and capacity building to avoid financing gaps or debt traps and proposed a crisis response process to be included in the annual monitoring cycle to analyse the impacts of shocks on the smooth transition strategy. It particularly identified LDC5 as an opportunity for the international community to adopt improved aid mechanisms, especially regarding concessional finance and innovative financing measures. The conference will also be an opportunity for the UN system, OHRLLS, and resident coordinators to step up and commit to increased support toward LDC graduation.

With the pressure of coping with climate, conflict, food and debt crises added to the already precarious circumstances of LDCs, graduation and how it is facilitated are critical for LDC development that adheres to the 2030 Agenda for Sustainable Development and the Sustainable Development Goals. Speaking at an LDC5 preparatory meeting in the Asia-Pacific region, Dr. A. K. Abdul Momen, Foreign Minister of Bangladesh, explained: “Transformative development is on the horizon but strong support to realize it is urgently needed…. LDCs and their international partners must collaborate to overcome the COVID-19 pandemic and tackle the climate crisis, but also provide specific support for LDCs to graduate smoothly out of the Least Developed category.”

In response, the CDP established an enhanced monitoring mechanism, called for by the 2022 DPoA for LDCs, which purports to better respond to emerging crises and link monitoring to specific support. To complement existing national and international monitoring processes by focusing on the impact of crises on the smooth transition out of the LDC category, the mechanism is meant to be closely linked to a country’s own monitoring of its smooth transition strategy. The monitoring mechanism consists of three main elements: improved annual monitoring, the new crisis response process and strengthened support measures linked to the monitoring.

The crisis response process enables monitoring to react quickly to a crisis situation in a graduating or graduated country. It can be triggered by the country directly or through the UN resident coordinator, or by way of an automated trigger, using a set of agreed upon crisis indicators. The CDP country rapporteur then assesses the situation and its potential impact on graduation, and advises whether additional, crisis-specific graduation support measures may be needed.

At its 24th session in February 2022, the CDP elaborated on this mechanism and reported monitoring the development progress of one recently graduated country, Vanuatu, and seven graduating countries: Angola, Bangladesh, Bhutan, the Lao People’s Democratic Republic, Nepal, Sao Tome and Principe and Solomon Islands. It also reached out to countries whose graduation had been deferred, namely, Kiribati and Tuvalu, to discuss development challenges.

The 2022 report acknowledged that owing to multiple crises, all of these countries find it difficult to maintain macroeconomic stability. With reduced fiscal space, it is hard for them to prioritize both short-term recovery and long-term sustainable development, potentially involving policy trade-offs. The enhanced monitoring mechanism would provide another layer of protection against crisis situations arising from these external pressures on LDCs by identifying potential issue areas and mitigation measures.

There are multiple crises facing LDCs, existing prior to and beyond the pandemic, including the alarming and accelerating increase in global warming, natural disasters, armed conflict and related crises of hunger and food security. While these multitude of crises impact all countries negatively, the detriment is exponential for LDCs with their manifold and specific vulnerabilities. This risks LDCs straying from the DPoA goal of “accelerating the number of least developed countries reaching the graduation thresholds and for ensuring sustainable and irreversible graduation” (para 265), and already graduated countries will no longer meet the criteria and in fact, slide back. With the DPoA target of another 15 to meet the graduation criteria by 2031 and more than a third of LDCs in various stages of the graduation process, the CDP is “deeply concerned that a significant number of least developed countries, particularly those in Africa, will remain far behind and struggle to achieve graduation”.

With many unknown variables in this perennial state of crises, it will be important for the graduation criteria to be reviewed and updated to be fit for purpose: a sustainable and irreversible graduation – and more importantly, sustainable development – of all LDCs. The external stressors of interlocking crises disproportionately burden the “poorest and most vulnerable,” as the UN Secretary-General underlined in his address to the 2022 General Assembly and pose a challenge to the global system that is “a case study in moral and economic injustice.”

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CSO Participation at the UN: Perspectives on CSO Engagement in UN Processes

3. November 2022 - 22:13

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This GPW Round Up #3, CSO Participation at the UN: Perspectives on CSO Engagement in UN Processes, highlights some insights, analyses, commentary and advocacy regarding civil society organizations engaging in UN multilateral processses. From the Member States to the UN Secretary-General, CSOs are frequently exalted as an integral part of multilateral policy-making processes; yet, whether their calls and analyses are genuinely heeded is up for debate. Some Member States and CSOs have called for improvements in CSO participation, supported by recommendations from experts on reforms to CSO engagement.

The Round Up features comments and debates by the Secretary-General, Member States and CSOs, along with sharp criticisms from CSOs on the increasing influence of the corporate sector [in the UN] and the roadblocks to meaningful and inclusive CSO participation. It links analyses to relevant recommendations of the UN Secretary-General’s report, Our Common Agenda, recommendations that are being debated by Member States as they lay out the UN agenda for the next three years.

The post CSO Participation at the UN: Perspectives on CSO Engagement in UN Processes appeared first on Global Policy Watch.

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2022 UN General Assembly High-level Debate: perspectives from the Global South

1. November 2022 - 15:16

The GPW Team

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In September 2022, heads of state and government spoke at the UN Headquarters on the theme “A watershed moment: transformative solutions to interlocking challenges”.

Secretary-General António Guterres’s message was clear: “Our world is in peril and paralyzed”. He launched the High-level General Debate bluntly: “Our world is in big trouble. Divides are growing deeper. Inequalities are growing wider. Challenges are spreading farther.” He urged, “We need action across the board.”

“Let’s have no illusions. We are in rough seas. A winter of global discontent is on the horizon. A cost-of-living crisis is raging. Trust is crumbling. Inequalities are exploding. Our planet is burning. People are hurting – with the most vulnerable suffering the most. The United Nations Charter and the ideals it represents are in jeopardy. We have a duty to act.”

These concerns reverberated throughout the high-level session. This briefing contains a sampling from countries of the Global South.

(All statements can be viewed at the official UNGA 77 General Debate archive or this playlist. Most written statements are also available on the official archive.)

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Growing inequalities highlight the unjust system

Prime Minister Mia Mottley of Barbados: “We live in a world… where the disparity in income is too great. And we live in a world where some are even benefitting from the crises disproportionately and egregiously. We must ask ourselves therefore whether the time has not come for a review of the settlement of the Bretton Woods institutions that no longer serve the purpose in the 21st century that they served when they were catering to a quarter of the nation states that are now members of this institution.”

President Alberto Fernández of Argentina: “Is it right that the fortune of only 10 men is greater than the income of 40 percent of the global population? Is it ethical that the pandemic claimed four times more lives in the poorest nations than in the rich ones? Not speaking out against this model of accumulation that places income in the hands of the few while millions remain plunged in poverty may make us complicit in simply strengthening this inequality. We have arrived in time to halt several of the threats facing humankind, the injustices that we are nothing will only worsen if extreme positions are allowed to take root. If wars continue over time allowing hunger to take root and if persistent inflation persistently corrodes the income of the weakest among us. We must work together and strengthen cooperation-based multilateralism.”

President Gustavo Petro of Colombia: “For power relations in the world, the jungle and its inhabitants are those responsible for the plague that afflicts them. …The relations of power are plagued by the addiction to money, to perpetrate themselves, an addiction to oil, to cocaine and harder drugs that can serve to anesthetize them. There is nothing more hypocritical than the discourse of saving the jungle.

“…Climate disaster will kill hundreds of millions of people [and] it is not produced by the planet it is produced by capital. The cause of climate disaster is capital. The logic of relating ourselves to consume more and more to produce more and more and for some to earn more and more money produces a climate disaster.”

Prime Minister John Briceño of Belize: “Our current systems and institutions, conceived for World War II recovery, are straining under the weight of today’s crises. In truth, they are broken and stand impotent in the face of the 3Cs – COVID, climate, and conflict… We urgently need a new global financial architecture that has the willingness and capacity to identify systemic threats, like debt, climate risk, and devise tools that are commensurable to the challenge. It should be dedicated to achieving the SDGs, Net Zero emissions and to build resilience… We call on IFIs, MDBs to use the MVI (Multidimensional Vulnerability Index)”.

This was echoed by Prime Minister Terrance Drew of Saint Kitts and Nevis: “This situation cries out for the multilateral system to urgently put in place a multidimensional vulnerability index, which takes into consideration the peculiar characteristics and climate vulnerabilities of small island developing states such as mine. All countries are environmentally vulnerable; all are socially and economically exposed to exogenous shock, but in the climate-challenged, tourism-dependent countries in the Caribbean Sea, during several consecutive months of every year, run the real risk of a wipe out event.”

President Wavel Ramkalawan of Seychelles: “We cannot continue to rely on temporary solutions to address the systemic faults within the existing development cooperation mechanisms. If this is to be a watershed moment, we must put into practice real solutions that focus on addressing vulnerabilities and building resilience to ensure socio-economic sustainability.”

Does Debt Crisis require new financial architecture?

“We need a reformed financial architecture that benefits developing countries, providing critical financing and debt relief,” urged the Secretary-General in his address at the opening of SDG Moment during the high-level week. “This is the only sustainable pathway to address the obscene inequalities that exist in every country, while ensuring that the world doesn’t slide into a recession.” With only eight more years to the end of the 2030 Agenda for Sustainable Development, he reiterated the urgency for commitments and measure for successful SDG implementation.

Prime Minister Ismail Sabri Yaakob of Malaysia: “In an international financial and monetary structure that is still dominated by a few major powers, as well as during the world economic recovery, domestic monetary decisions have to be adjusted by considering the reality and needs of developing countries. In this connection, Malaysia urges the UN Member States to establish an International Monetary Cooperation Mechanism to build a more effective and just system that is able to balance the needs of global development.”

Prime Minister John Briceño of Belize: “The current tentative, reactionary and piecemeal approach to addressing the debt problem has proven hopelessly ineffective. We must break the pernicious cycle between debt and climate and disaster risk. IFIs must incorporate climate risk into debt sustainability tools.”

President Mohamed Irfaan Ali of Guyana: “…there must be an immediate re-examination of the financing gap and the debt portfolio of developing countries to open fiscal space and create an opportunity for recovery and bridging the gap.”

Prime Minister Mia Mottley of Barbados asked the IMF to consider delinking the resilience and sustainability trust which will require “more countries seeding that fund with capital and more countries agreeing perhaps to allow their Special Drawing Rights to be used there, just as we ask them to allow those Special Drawing Rights to be used to allow multilateral development banks to significantly increase the money available,” particularly now as we face “a debt crisis where more than 45 countries” are in debt because of increased borrowing costs caused by inflation.

Prime Minister John Briceño of Belize: “The IMF is largely devoid of ways to quantify consequential climate impacts on public debt and countries’ capacity to pay. The IFI’s obstinate focus on primary balances and debt to GDP ratios ignores the empirical evidence that nature is in revolt. Incredibly, a recent analysis revealed that of the 80 IMF-funded Country Programmes around the world, climate was central to the country assessment in only a single case – Samoa… I ask, how much longer will this new ‘climate colonialism’ punish the victims and spare the victimizers?”

President Akufo-Addo of Ghana: “The spillover from central banks raising interest rates to combat inflation has been severe beyond borders, as global investors pull money out of developing economies to invest in bonds in the developed world. This has led to depreciating currencies and increased borrowing costs; meaning we need to raise and spend more of our own currencies to service our foreign debts in US dollars….

“It has become clear, if ever there was any doubt, that the international financial structure is skewed significantly against developing and emerging economies like Ghana. The avenues that are opened to powerful nations to enable them take measures that would ease pressures on their economies are closed to small nations. To make matters worse, credit rating agencies have been quick to downgrade economies in Africa, making it harder to service our debts. The tag of Africa as an investment risk is little more than, in substance, a self-fulfilling prophecy created by the prejudice of the international money market, which denies us access to cheaper borrowing, pushing us deeper into debts.”

Climate and food crisis go to issue of power imbalances

Prime Minister Muhammad Shehbaz Sharif of Pakistan: “Pakistan has never seen a starker and more devastating example of the impact of global warming,” he said, referring to the 40 days flooding that has pushed a third of the country under water. Pakistan is one of the 10 most climate-vulnerable countries that emit less than 1 percent of the greenhouse gases that are burning the planet. “What happened in Pakistan will not stay in Pakistan,” he stated, warning that unless world leaders act now “there will be no earth to fight wars over”.

President William Ruto of Kenya: “The world is facing the consequences of climate change. In Kenya, 1.3 million residents have become food insecure. Lowered agricultural output, water scarcity and starvation are looming.” In the lead-up to the COP, he urged member states to not waste time to demonstrate political will to cooperate and share technologies — to jointly usher in a “new paradigm in multilateralism”.

Deputy Prime Minister Don Pramudwinal of Thailand highlighted the need to strengthen multilateral action to address the global food crisis: “It is vital to keep our global supply chains open for seamless cross-border flows of food, fertilizers, and essential goods.”

President Gabriel Boric of Chile: “Our country, as many of yours, many of the Global South, is responsible for a minimum of GHG emissions – in our case it’s only 0.24 percent, while the largest economies of the G20… produce 80 percent of GHG emissions. This inequality…is an inherent threat to democracy because it breaks society apart, it destroys social cohesion and therefore hampers understanding and building a freer, more fair future together…I invite you to plan ahead in the search for greater social justice, to better distribute wealth and power.”

Prime Minister John Briceño of Belize: “Belize is ranked 8th out of 183 on the Global Climate Risk Index. We are but one hurricane away from catastrophe. Yet financing needed for climate adaptation remains woefully inadequate; only about a quarter of all climate finance goes to adaptation.”

President Gustavo Petro of Colombia: “I call on you to save the Amazon jungle with the resources that can be devoted to life throughout the world. If you do not have the ability to finance the fund to revitalize the jungle, if it is more important to devote money to weapons than to life, then let us reduce external debt to release our own state budgets, so we can carry out the task of saving humanity and life on the planet.”

Prime Minister Ismail Sabri Yaakob of Malaysia stated that climate is a universal problem which affects all: “Developed countries must fulfil their annual commitments to provide US $100 billion unconditionally.” He then called for developing countries to have “new, fair, inclusive and affordable technology which facilitates their greener and more sustainable socioeconomic development.”

Minister for Foreign Affairs Robert Dussey of Togo: “We ardently hope that the next COP 27, to be held 7-18 November 2022 in Egypt, will help to genuinely place back at the heart of international priorities the preservation of the environment, by incentivizing stakeholders to honour their financing pledges, which are necessary to tackle global warming and climate change.”

Prime Minister Adriano Afonso Maleiane of Mozambique: “Climate change places Mozambique under permanent surveillance. In recent times, our country has been cyclically and intensively affected by depressions, tropical cyclones, rains and strong winds, floods and droughts that have caused loss of human lives, displacement of persons, extensive damage to infrastructure and socio-economic activities… between 2019 and 2022, Mozambique was hit by cyclones Idai, Kenneth, Guambe, Chalane, Ana and Gombe.” He added that, in response, Mozambique joined countries of the southern region of Africa and cooperation partners to set up in Nacala-Porto the Center for Humanitarian and Emergency Operations of the Southern African Development Community.

President Mohamed Irfaan Ali of Guyana: “According to the World Bank and Global Trade Alert, between January – June 2022, 135 policy measures were announced or implemented that affected trade in food and fertilizer… During the same period, 34 nations imposed restrictive export measures on food and fertilizers.” He asked, “Whether globalization is only applicable under normal conditions or whether it is opportunistic in its application and when a crisis arises, we lock ourselves in and forget about multilateralism and globalization.”

Minister of Foreign Affairs Sameh Shoukry of Egypt: “Unfortunately, in Africa alone, one in every five [people] are at risk of hunger and the continent remains a net food importer at an annual cost of US$43 billion. In this vein, we reiterate the need to address this crisis through an integrated strategy that tackles its root causes,” by addressing, among others, “sustainable farming and food systems and meet the urgent needs of food importing developing countries” and “support[ing] the developing countries and the LDCs in their efforts to confront the devastating impact of climate change [as they] are the most deserving of such support, based on the principles of equity and Common but Differentiated Responsibilities.”

President Akufo-Addo of Ghana: “Every bullet, every bomb, every shell that hits a target in Ukraine, hits our pockets and our economies in Africa.” As global inflation soars, “Ghana is experiencing the highest rate for 21 years, with high food prices hurting the poor, especially in urban areas the most. It has become clear, if ever there was any doubt, that the international financial structure is skewed significantly against developing and emerging economies….”

Foreign Minister Retno Lestari Priansar Marsudi of Indonesia: “We cannot let global recovery fall at the mercy of geopolitics.” Calling the upcoming G20 Summit in her country a “catalyst for recovery”, she urged countries to address food and energy crises to avoid a fertilizer crisis that would affect billions of people, particularly in developing countries.

President David Kabua of Marshall Islands: “We value the United Nations as our primary international stage. But if the world does not adequately respond to the island nations and as seas rise, then this is really no United Nations at all.”

Loss and damage: a forgotten climate commitment?

At the opening of the General Debate, the Secretary-General urged governments and multilateral agencies to make climate action a priority, including holding fossil fuel companies to account. He called on developed economies “to tax the windfall profits of fossil fuel companies. Those funds should be re-directed in two ways: to countries suffering loss and damage caused by the climate crisis; and to people struggling with rising food and energy prices.”

Prime Minister Mia Mottley of Barbados: “The developing world and in particular, the Small Island Developing States, came to Paris and agreed for a global compact. One of the key aspects that allowed us to do so was the promise of Loss and Damage. Today, the people of Guadalupe and Puerto Rico, yesterday Turks and Caicos …face disruption by Hurricane Fiona. Today, I received news about difficulties for the natural gas supply in my own country, and I suspect others in this part of the world…

“When we match this with the reality that we have not planned in granular form, how we will have the capacity to meet the commitments that we have made for Net Zero… then I see trouble ahead of us and we must pause and get it right. Our small states are making commitments that the world wants to hear, but when those commitments are undermined by the inability to supply the electric cars or the batteries necessary to sustain renewable energy, then we know we have a problem.”

She explained that the impact of climate change on access to natural gas makes clear why Emerging Market Countries in the Caribbean and in Africa “have determined that we cannot abandon access to our own natural gas resources until we are assured that we have the capacity to sustain our populations. This is where the rubber meets the ground and I ask us today to recognize that those commitments on Loss and Damage and that granular detail that matches commitment to capacity are absolutely critical if we are to make serious progress in saving our world.”

Prime Minister John Briceño of Belize: “Public sector expenditure on climate-caused “loss and damage cannot continue to be classified according to fiscal orthodoxy.” At the COP in Glasgow, he added: “Rather than delivering a Loss and Damage Facility to help our countries deal with the losses and damages caused by climate change, we left with más palabras!”

Prime Minister Frank Bainimarama of Fiji: “Only come to [the COP in] Sharm El-Sheikh if you are ready to agree to a loss and damage mechanism… in the order of US$750 billion, with at least 10 percent of climate finance destined for small island states. …This is our story… a story of David against Goliath. A small state facing nations, corporations, and interests far bigger than we are. …This is not the time for words, this is the time for will and a time for courage.”

President Wavel Ramkalawan of Seychelles: “We are at the cusp of an ecological collapse… We need bold actions not unfulfilled promises and pledges… We must also confront the gross injustice of having citizens of states least responsible for the unravelling climate-induced disaster pay for the loss and damage caused by others.”

Global governance – highlights unequal positioning of Africa

Minister for Foreign Affairs Robert Dussey of Togo set out the unjust the power relationship: “Africa in the eyes of certain powers is only of interest when they are finding themselves in difficulty…. Today, Africa no longer holds the place that it deserves on the international stage. Noting that when the UN was created in 1945, with the exception of Liberia and Ethiopia, the countries of Africa were not yet independent: “After 77 years, it is the same International System, unfortunately, which persists, owing to the will of the five permanent members of the Security Council….”

Pointing to the consensus among 54 African States regarding the need to secure two permanent seats on the Security Council, he said that “the reluctance of certain members of the P5… to see Africa occupy this place stands in stark relief. …The great powers wish to boil Africa down to a purely instrumental entity for the service of their causes and they clearly do not wish to see Africa play an important role, a key role in the world…. They look towards Africa with agendas that are dictated by their own interests….

“In the concert of nations, there is a need for Africa to be heard, for dialogue to have a purpose. The inability to listen perverts the purpose of dialogue, morphing it into a juxtaposition of monologues partial reasonings, at times in the guise of pseudo-multilateralism whose danger resides in the distortion of the relationship. And yet in today’s world it is only by pooling our intelligence that we can reach agreement on the goals to be achieved together.”

President Macky Sall of Senegal: “I have come to say that Africa has suffered enough of the burden of history; that it does not want to be the breeding ground of a new cold war, but rather a pole of stability and opportunity open to all its partners, on a mutually beneficial basis.”

Prime Minister Mia Mottley of Barbados stated that the G7 and G20, “as the informal subcommittee of governance of this world” must recognize that we can no longer “call year after year after year for the inclusion of the people of Africa and African descent to be included in the G7 and G20. For how can a world have at its core a subcommittee that excludes more than 1.4, 1.5 billion people of the world and expect it to reflect fairness and transparency in its decision-making?”

This goes beyond fairness, she added, saying that those countries “must understand that if we are to move from possibilities to realities, we must embrace a transparent framework that allows our people, who are losing faith in their institutions and in the governance of this world, to understand that fairness means …the ability for all to have a voice, and that we can’t only speak to it within the corridors of democracy within the nation state, but it will only mean something when it also is reflected in our international community.”

Security imperatives require Security Council reform: from cooperation to ending the veto

Then President Paul-Henri Damiba of Burkino Faso: “No precautions or prevention measures will prevent terrorism from crossing the Atlantic if Sahel is abandoned.”

Minister for Foreign Affairs Robert Dussey of Togo: “The deterioration of the security situation [in Sahel] should be of concern to all of us, first and foremost to the United Nations. That having been said, there’s an important need to fully revitalize our organization and to spare no effort to achieve reform of the Security Council.”

President Macky Sall of Senegal: “It is time to heed Africa’s just and legitimate demand for Security Council reform, as reflected in the Ezulwini consensus. In the same vein, I reaffirm our request for the African Union to be granted a seat in the G20 so that Africa can finally be represented where decisions that affect 1 billion 400 million Africans are being taken.”

Permanent Representative to the UN Maria De Jesus Ferreira of Angola: “Negotiations for reforming the UN Security Council still have not produced the results that the overwhelming majority of Member States expects… The Ezulwini Consensus and the Sirte Declaration represent a viable option to restore the rights and legitimate aspirations of the African continent and to correct the historical injustices that the region is experiencing with its absence from the decision-making center of one of the main statutory bodies in matters of international peace and security created by the UN Charter.”

Minister for External Affairs Subrahmanyam Jaishankar of India: “As we begin the G-20 presidency this December, we are sensitive to the challenges faced by developing countries. India will work with other G-20 members to address serious issues of debt, economic growth, food and energy security and particularly environment. The reform of governance of multilateral financial institutions will continue to be one of our core priorities… The call for reformed multilateralism – with reforms of the Security Council at its core – enjoys considerable support among UN members.” While India is completing its tenure this year, it seeks to ensure that the injustice faced by the Global South is addressed through such a process. Serious negotiations “must not be blocked by procedural tactics. Naysayers cannot hold the intergovernmental negotiations process hostage in perpetuity.”

Prime Minister Mia Mottley of Barbados: “Earlier this week, President Biden spoke of the need to reform the Security Council. We call an echo for that, but we go further, because we believe that a Security Council that retains the power of veto in the hands of a few will still lead us to war as we have seen this year. Therefore, the reform simply must not be in its composition but also in the removal of that veto.”

The post 2022 UN General Assembly High-level Debate: perspectives from the Global South appeared first on Global Policy Watch.

Kategorien: english, Ticker

Injuring the Care Economy with Private Finance

26. September 2022 - 20:25

By Marina Durano, Ph.D.*

Download this briefing (pdf version).

Recovery with care

The pandemic lockdowns and limits to mobility taught painful lessons about the importance of care. First, the pandemic forced us to recognize the value of care workers as essential and that we are dependent on a broad spectrum of essential workers. Second, a significant share of deaths occurred in long-term care homes, exposing the vulnerabilities of a long-neglected sector. Third, parents with school-age children felt the stresses of holding down a job while working from home at the same time that they are caring for their children and family members within a confined space.

These realizations have inspired women’s movements around the world to demand a feminist approach to recovery from the pandemic. Normal was the problem; building back is not the way forward. All discussions on recovery need to recognize the value of care work, reducing the burdens of care, and redistributing the responsibilities for care. Among the first to make this demand was the US state of Hawai’i that published a Feminist Economic Recovery Plan in April 2020 calling for strengthened social infrastructure for childcare, education, and healthcare.1 Canadian civil society urged a similar approach, calling for increased spending on care as a matter of social policy and public investment.2 In Latin America, ECLAC and UN Women promoted the establishment of comprehensive care systems, especially given their potential as a driver for economic recovery.3 The Association of Southeast Asian Nations also sees possibilities not only for recovery from the pandemic but also as a response to their demographic transitions and challenges brought on by extreme climate events.4 And the European Commission indicated its intention to create a European Care Strategy building upon progress made to the European Pillar of Social Rights and the Work-Life Balance Directive.5

Artificial impoverishment of the state?

In all of these discussions there is a fundamental question: How is this to be paid for? While it may seem straightforward to say these investments should be publicly funded, the nature of public funding is not so straightforward operationally. The public-private divide in financing is no longer clear, especially once one accounts for subsidies, user fees, public guarantees to private investors, among other financial instruments and measures. Not only does the question of finance affect accessibility of essential services, especially by marginalized communities, but financing can also have an impact on the effectiveness of services in contributing to wellbeing.

But first, we must acknowledge constraints on fiscal space. The demands to limit the size of government through a combination of reduced taxes and lower spending create constraints—real and imagined—on a government’s ability to respond appropriately to the care needs of its population. Since the turn of the millennium, there have been several financial and economic crises and the current pandemic situation took the global economy to the brink of a new level of recession in 2019 and recovery of 2021 is “losing steam” in 2022.6 Responses to the pandemic and recovery from it have entailed increased borrowing by governments such that total global debt rose to 230 percent of gross domestic product in 2020, up by 30 percentage points over the previous year.7 Increased borrowing results from a period of rising debt for emerging market and developing economies. These trends have given rise to a narrative of state impoverishment, in both rich and poor countries. Even though fiscal expansion, funded by borrowing is a necessary step to stave off catastrophic consequences, experience has shown that governments typically start with a first phase of shorter-term fiscal expansion followed by a phase of longer-term contraction, according to development experts Alexander Kentikelenis and Thomas Stubbs. If this is the case, then we will find governments confronting a situation of austerity soon after recovery, especially if they reallocate spending towards debt servicing. The situation is worse if interest rates rise during the period of falling public spending because interest payments could turn into a major budget expense. Early analysis of IMF loans to countries during the onset of the pandemic already indicates an unfavourable direction, which will be worse for those countries with a higher probability of debt distress.8

These macroeconomic constraints have laid the ground for the public sector to seek financing from private sources, especially recently. In fact, for health care systems alone, health care services are delivered through a combination of public and private providers. If one takes the widest range of care services, including those provided in the household, then private care provision includes non-profit private providers in addition to unpaid care givers, typically women as wives and mothers. Paying for health care also entails some mix of tax revenue, individual out-of-pocket payments, health insurance and charitable contributions. Ownership structures of health facilities can also be mixed, raising questions about the appropriate combination of incentives and regulations to ensure high quality service provision.

Building comprehensive care systems that seek to reduce the unpaid care work burden of women in households and expand paid care work that recognizes and pays for care giving skills will have to contend with the question of funding for services and ownership of facilities as well as the entities that will govern service provision. It is important, therefore, to understand how health care has come to be marketized, privatized, and ultimately financialized. Understanding the process that health care sectors, especially its mature segments, have gone through can help policy makers redefine recovery through care provisioning early on.

Privatization of care

The artificial limits to state funding for the public good is part of a narrative that holds that the only way to continue to provide public services is through the market, that is, private actors are best able to achieve cost efficiency and they have an adequate amount of capital needed to fund large scale interventions. No state has the resources to fulfill unmet needs for care, resulting in the current structure of a highly segmented care economy comprised of unpaid care givers in the home, publicly provided care services, and partially subsidized care provided by private actors, especially an increasing number of for-profit corporations contracted by state institutions. Where public provision is minimal, most care is fully paid out-of-pocket to private providers.

Among the industrialized countries, the decade of the 1990s saw changes in public sector management that created opportunities for corporations to enter into the health care, nursing home and long-term care sectors, which is what we have seen in Canada, the USA and the UK. Even Norway and Sweden have not been spared although the privatized portion of their nursing homes is not as large.9 Developing countries followed suit about a decade later, mostly in the health care sector, since nursing home and similar long-term care services sectors were still in their infancy. Public-private partnerships became a rallying cry of multilateral financial institutions and developing country governments eager to generate capital to improve cost-efficiency and expand health care infrastructure. In large middle-income countries, the ability of private corporations to enter the sector was facilitated by changes in foreign ownership rules, as in the case of hospitals in China and India, or the adoption of new contracting mechanisms allowing the entry of private providers as in the case of Turkey.10 In British Columbia, Canada nursing home privatization was accompanied by labour market deregulation.11 What this shows is that privatization does not happen without deregulation of either the ownership rules or of labour rules, as long as these reforms open up the space for private sector entry into the sector.

Creating financial assets from health care provision

Profitability is a fundamental question for venturing into the health care sector. A direct approach of buying facilities and consolidating them into a larger corporation—mergers and acquisitions—still requires clarity over which business model delivers returns for the investors. One model focuses on a high-income market niche that allows business to charge high user fees, with the possibility of extending the market through complementary health insurance. Another model focuses on the low-income market, accompanied by government-determined minimum health care packages subject to a price cap with returns dependent on achieving economies of scale. In either case, so long as profitability improves shareholder value, these direct investments in health will continue to be attractive assets with growth potential. More importantly, as health care analysts Benjamin Hunter and Susan Murray argue, these health care assets can be easily bought, sold, and traded.12

From privatization to financialization

More complex financial transactions—including takeovers by private equity firms– can occur when it comes to facilities infrastructure and scaled up operations, as in the case of hospitals and related medical complexes as well as nursing and long-term care homes. In the United States, the size of private equity deals increased from US$41.5 billion to US$119.9 billion between 2010 and 2019.13 In 2021, global private equity deals amounted to US$151 billion, twice as much as the best performance year since tracking.

In these large vertically integrated care complexes, private equity investors find opportunity to generate profits through a multi-pronged financial re-engineering process. Revenue is generated not only from fees from clients and health subsidies from the government, but also from consultancy fees and sale of property assets attached to lease-back deals. Some of these transactions involve buying an organization at below market value and breaking up the assets to sell for a sum larger than its whole. Operational costs are lowered through workforce reductions. Some of these private equity deals do not bring in fresh capital, rather they pursue leveraged buyouts using loans from the banking system, which, while adding to the cost of operations (similarly with lease arrangements), has the benefit of reducing tax obligations. The unfortunate result is poor quality service provision and, in some cases, bankruptcy, as in the widely publicized case of Four Seasons Healthcare in the UK.14

Real estate investment trusts (REITs) play a role in this narrative, particularly when property sales are involved. These investors offer a relatively liquid asset by allowing instantaneous buying or selling in ownership shares of real estate that delivers regular dividends from lease earnings. Real estate covered under the health care segment includes medical office buildings, senior housing, hospitals, medical labs, nursing facilities, and post-acute care facilities. Based on a comparison of 20-year monthly average total return among the REIT subsectors, health subsegment (1.38%) is only outperformed by data center REITs (1.60%) and infrastructure REITs (1.52%).15 NAREIT, a professional association of REITs focused on the US market but with global reach, reported that 2019 saw a massive increase in interest in social impact. One of the ways that NAREIT members contribute to social impact is through tenant and community engagement programmes. NAREIT’s most significant success appears to be in the diversity, equity, and inclusion initiatives inside their respective member organizations. There’s more work needed to understand how REIT tenant and community engagement contributes to health outcomes in the health care segment, especially in cases where they own properties operated by private equity-owned facilities.

Even child care centres have become attractive for investors as in the case of New Zealand and Australia that saw an uptick in advertising and sales of child care properties as high yield assets nearly 10 years ago with “low financial risk, long-term tenancy agreements and a sector backed by substantial government funding for the foreseeable future.”16 The child care sector, however, does not appear to be equally consolidated as health care and so the turnover of properties is relatively slower, as long as 15 years since property values take time to rise. This rate of turnover is twice as long as the investor turnover of health facilities.

Environmental, Social, Governance (ESG) Criteria

Not all investors are created equal. A section of investors wants to contribute to the social good through greater transparency. Today, investors and regulators can look to ESG (environmental, social, governance) criteria to assess risks and growth potential as well as long-term success of a corporation. Sixty-four stock exchanges have written ESG guidelines for reporting that help listed companies share necessary information with a broader set of investors as well as issuers of equity assets, according to the UN Sustainable Stock Exchanges Initiative. Thus far, social criteria lag behind environmental and governance criteria in being used for reporting. Social criteria currently report on gender gaps in leadership or in pay, number of workers hired, diversity of workers but not on working conditions or labour rights.

What is ESG?

Ethical investing or sustainable investing needed non-financial indicators to determine whether an investment generated impacts that sustained the environment (E) or created positive social (S) relations inside or outside the company or demonstrated high levels of integrity in its corporate governance (G). ESG is an acronym referring to the set of criteria used by investors to assess company performance that is additional to evaluations based on financial performance. The actual criteria used for assessment varies considerably, which is why stock market exchanges have developed guidelines for reporting these criteria to the public to ease comparison.

A recently published guidance and best practices report from the UN Sustainable Stock Exchanges initiative suggests how gender equality can be integrated into stock exchange operations. Along with ESG guidelines that have gender equality criteria, the report is focused on the start line of promoting women’s businesses, women’s leadership in business, enhancing women-targeted products and services and their market performance. These guidelines apply to the stock exchange organization, its listed companies, and prospective partners.17

Moreover, health outcomes have not caught on as a basis for assessment. Even as many fund managers point to the significant amount of ESG investing going into health care, most of the companies listed in the health sector are pharmaceuticals, not care service providers. Nevertheless, there is recent experience where ESG investors in health care appreciated the gravity of material risks posed by the poor health outcomes resulting from poor management and working conditions in the sector as the experience of a French multinational company recently evidenced. Its stock value plunged by half when an investigative journalist published an expose about the poor quality of care in their facilities.18

An even stronger commitment to ESG is when companies seek B-corporation certification that provides an assessment of social and environmental impact performance, a legal commitment towards accountability for all stakeholders and not only shareholders, and a commitment to transparency to the share the data used for assessment with the public. The certification process also includes SDG modules if companies want to identify their contribution to the 2030 Agenda for Sustainable Development. Of note, among the assessment criteria is a section covering workers, including their “financial security, health and safety, wellness, career development, and engagement and satisfaction”. Finally, customer ratings are incorporated through data gathered on the quality of a company’s products and services, ethical marketing, data privacy and security, and feedback channels. In the health sector, these two sets of criteria provide a more robust view of how a company can potentially contribute to an alignment of both care workers’ rights and care receivers’ rights.

We can also look to philanthropy that has expanded its offerings from grants to social impact investing, which the Rockefeller Foundation pioneered. In its broadest sense, the International Finance Corporation (IFC) estimated that US$2.281 trillion can be considered as impact investments, although only US$286 billion can be said to have the full combination of intention, financial contribution, and measurement of impact clearly in place. Impact investments distinguish between programme-related investments (PRI), where financial returns are secondary, and mission-related investments (MRI) where competitive returns are sought. MRI links closely with ESG criteria, especially in determining responsible and sustainable investments. Responsible investments look at potential risks that affect the value of the company and its growth potential. Sustainability, meanwhile, is less about the environment, and more about the qualities of the investment portfolio coupled with shareholder advocacy.

Overall, we can say that the social aspect of ESG criteria needs to catch up with environmental and governance criteria. We can also say that gender equality criteria focus on counting women and to a lesser extent women-targeted products and services. Neither working conditions, unionization, nor wellbeing outcomes enter prominently into the picture. Certification for B-corporation, however, tries to address some of these concerns about outcome indicators. How well philanthropy addresses these concerns through its social impact investing vehicles is also worth looking into, especially as they decide over how much risk they are willing to take on, how they prioritize social impacts, and how they define competitive returns for each of the investment deals that they close.

Multilateral Facilitation of Corporate Investing in Health and Gender

While all these concerns may sound like a first world problem, developing countries are not immune since a crucial source of financing comes from multilateral development banks, such as the World Bank Group. Investors for Health, for example, claims to be the first community of both public and private investors dedicated to inclusive health care systems in emerging economies. It has 38 member funds led by an Executive Committee comprised of representatives from the CDC Group, the IFC, Quadria Capital, and Dalberg Advisors.

The IFC alone has US$2 billion of active investments in its health care portfolio. IFC’s health sector group operating in Africa is proud to see increased interest by private equity funds not only from global players but also from locally organized but much smaller investment vehicles such as the Africa Health Fund and the Investment Fund for Health in Africa (total US$200 million).19

Although this analysis has focused thus far on investments in the mature segments of the health sector, it is important to assess a relatively recent development regarding gender lens investing. During the 2018 G7 Summit, the development finance institutions of the member countries pledged to allocate more of their investments to promoting women’s economic empowerment. Much of the criteria used is very similar to ESG criteria that focuses on gender equity, such as, ownership by women, women in leadership positions, share of women in the workforce, or extent to which products and services benefit women.

Gender lens investing merges with the care economy through a working group coordinated by GenderSmart, which is an initiative that is building an ecosystem that will serve as an enabling environment for increased investments in women and gender equality. Its Care Economy Working Group is a partnership with 2X Collaborative (the G7 initiative for gender lens investing) with Open Society Foundations, Generation Foundation, International Development Research Centre, and KORE Global.

In contexts where risks are perceived to be high, investors will hesitate to enter into deals. Blended finance can come into the picture to attract market-rate investors into seemingly high-risk investments. Blended finance offers a deal structure that combines a variety of financing instruments that reduces the risk profile of an investment or catalyse private and public capital. Some of these instruments include junior equity, subordinated debt, or first-loss capital. All three offer to take on additional risks or face larger losses, which should incentivize other investors to join. Other financial instruments include investment guarantees and technical assistance that mitigate operational losses.

In a development context, blended finance generates additional capital from philanthropic funds, social impact investors, or ESG investors to combine with capital provided by development finance institutions such as the IFC. In this setting, the rationale for using blended finance is based on the ability of a prospective investment to demonstrate its development impact and, particularly for investments in care, a need to demonstrate that investments can deliver improved working conditions, high quality care, as well as gender equality outcomes. Blended finance has become a buzz word in the development community interested in promoting the 2030 Agenda and its sustainable development goals. The US Agency for International Development (USAID), for example, sees value in using blended finance instruments to fill in the investment gaps in health care.20

It’s clear that development finance institutions are playing a shepherding role for private capital in developed countries to move into the developing world. Emerging economies tend to be preferred markets by private capital given their larger markets and growth opportunities. Financing gaps are much larger in low-income to lower middle-income countries but they are also considered higher risk markets. It is unclear that blended finance has solved these risk concerns enough to attract investments where these are needed. Initial analysis indicates that US$1 of investments by multilateral development banks and development finance institutions generates US$0.75 of private finance, of which US$0.37 goes to low-income countries.21 In an OECD report, investment guarantees have been the preferred instrument by private capital going into least-developed countries between 2017 and 2018.22

A longer history of bringing private sector into public sector service provision is public-private partnerships (PPPs), which cover long-term (at least 5 years but typically 15 or more years long) contracts with, ideally, sustained and collaborative engagement among partners. In addition to length of relationship, PPPs are designed to transfer (or share) risks from public to private sector, have mutually agreed performance indicators, and the public sector retains ownership of assets at the end of the contract. In the health care segment, PPPs can be infrastructure-based, clinical-services-based, or an integrated model that combines infrastructure and service delivery. According to a report by the Institute for Global Health Sciences, University of California, the UK was the first to implement infrastructure-based PPPs as way for its National Health Service to expand the number of hospitals. Similar projects were implemented in Australia, Canada, Egypt, Italy, Japan, South Africa and several Latin American countries. The services-based type PPP is less common, but India’s teaching hospitals have been expanding using this PPP model while Romania expanded dialysis services using it also. Integrated PPPs have also been implemented in Lesotho and in Spain.23

There are many questions regarding how to evaluate PPP projects, ranging from understanding the negotiation processes, to assessing alternative delivery systems, to lessons learned from unsuccessful projects, among others. Among the conclusions of a UN DESA scoping review of PPP guidelines is indicative: “On the whole, the guidelines reviewed leave out the viewpoint of the public or non-commercial stakeholders and the need for PPPs to generate public benefit and public good for the country and its people, including communities impacted adversely from infrastructure projects.” The health PPP in Lesotho has already received criticism in Lesotho Consumer Protection Association and Oxfam (2014) for taking up more than half of the government’s health budget, squeezing the amount needed for primary care and rural health care while generating 24 percent returns to the private sector partner. Meanwhile, the same health PPP facility fired 345 striking nurses and nursing assistants in 2021 who were seeking the same pay as their counterparts in other government-run hospitals. The Government of Lesotho and NetCare, the South African private sector partner, are currently at odds regarding payments and services provision.24

Concerns over worker pay and patient outcomes in private equity owned facilities

There is a slow trickle of studies that attempt to demonstrate that private equity ownership of health facilities and services do not necessarily lead to desirable health outcomes. Most of the studies have focused on developed countries, which raises louder alarms because these countries should have stronger regulatory institutions to prevent adverse outcomes.

In the USA, the home health care and hospice industries are dominated by for-profit companies that account for at least two-thirds of providers. Private equity investors made up half of the deals in home health care between 2018 and 2019; in the hospice transactions, private equity deals rose by 25 percent. Profitability in these industries is buoyed up by Medicare and Medicaid payments. Case studies by the Private Equity Stakeholder Project in home health care and hospice industries point to issues around workers (mostly women of color) who are underpaid and overworked; Medicare fraud; and lower quality of care compared to their non-profit counterparts.25 In another set of four case studies covering home health care, inpatient services, pharmaceuticals, and outpatient services, researchers are concerned about further consolidation in the health care markets raising anti-trust questions, especially in the local and regional markets; higher risks due to larger debt loads and asset stripping; and, there are serious concerns over increased risks associated with lower quality care and straining medical ethics standards.26

In an econometric analysis of nursing homes in the USA covering data for 2000 to 2017, about 7.4 million Medicare patients, researchers looked at the performance of short-term survival (during and within 90 days of stay) as an indicator of patient welfare in private equity owned nursing homes compared to others. These researchers found “that going to a PE-owned facility increases 90-day mortality by about 10% for short-stay Medicare patients, while taxpayer spending over the 90 days increases by 11%. Furthermore, we document declines in nurse availability per patient and in measures of compliance with Medicare’s standards of care.” The study also found higher use of anti-psychotic drugs, lower levels of mobility, and more intense pain reported by patients.27

These results are not limited to the USA. Case studies of care home groups in France, Germany, and UK shows this segment of the care sector is weakened by the financial re-engineering process that eventually produces adverse outcomes for both care workers and care receivers.28 There is enough evidence to insist on studying potential trade-offs between filling in the gaps in capital with lower well-being outcomes for workers and patients in the host countries. To what extent these apply in the broader, non-medicalized care settings of the care economy also needs to be understood better.

Options for the future

The best policy option for financing care economies will be strengthened domestic resource mobilization, especially in the use of progressive taxation and in establishing a fairer global tax regime. At the global level, recommendations from the Independent Commission for the Reform of International Corporate Taxation are worth implementing. Progressive taxation at the national level that reduces concentration of wealth among the elite or complement anti-trust action in highly concentrated industries also have value in generating higher tax-to-GDP ratios. These approaches should deny arguments that there is not enough money to finance public investments in a care economy as well as to fund universal social protection. There has not been enough policy emphasis on the redistributive function of taxation contributing to a lack of appreciation of its catalytic value for economic development.

In addition, regulatory agencies for consumer safety, health standards, environmental standards, labor standards, among others need to work more closely together with financial regulators to educate and train investors on how to be more effective at achieving their social impacts. ESG criteria can be created based on already existing legal standards as well as internationally agreed human rights standards, but the existing criteria need to be bolstered to go beyond box-ticking exercises.

Finally, democratizing finance offers some interesting options as discussed for example by economists Fred Block and Robert Hockett.29 Central monetary authorities need to be accountable to the people; they are public institutions, after all. Their role in credit allocation must fulfill the public purpose, especially when they make it possible for any kind of financial institution to access credit, thus having the power to re-balance social access to money and finance. Financial supervision practices can aim to curb speculative activity, through financial transactions taxes, capital gains taxes, or taxation of financial assets. Pension funds, social security funds, and sovereign wealth funds can also play a more progressive role by swaying the market through strategic investment decisions that promote social values rather than shallow social impact indicators.

A care economy will need a financial system that embodies the ethics of care. Its material base is founded upon a policy regime with a triad of taxation, regulation, and finance that all have to come together in ways to support and secure care provision, paving the way to more caring societies.

References

Abuzaineh, N., E. Brashers, S. Foong, R. Feachem, P. Da Rita (2018). “PPPs in healthcare: Models, lessons and trends for the future,” Healthcare Public Private Partnership Series, No. 4. San Francisco: The Global Health Group, Institute for Global Health Sciences, University of California, San Francisco, January 2018.

Armstrong, P., M.G. Cohen, L. Ritchie, L. Vosko, A. Yalnizyan (2020). “The Care Economy Statement,” https://thecareeconomy.ca/about-us/, accessed 12 May 2022.

ASEAN (2021). “ASEAN Comprehensive Framework on the Care Economy,” https://asean.org/, accessed 12 May 2022.

Attridge, Samantha, and Lars Engen (2019). “Blended Finance in the Poorest Countries: The Need for a Better Approach,” ODI Report. London: Overseas Development Institute.

Block, Fred and Robert Hockett (2022). “Democratizing Finance: Restructuring Credit to Transform Society,” London and New York: Verso Books.

Bourgeron, Theo, Caroline Metz, and Marcus Wolf (2021). “They Don’t Care: How Financial Investors Extract Profits from Care Homes,” Berlin: Finanzwende/Heinrich Boll Foundation.

Davis, Rob (2019). “Four Seasons care home operator collapses into administration,” The Guardian, 30 April 2019.

Eren Vural, I. (2017). “Financialization in Health Care: An Analysis of Private Equity Fund Investments in Turkey,” Social Science and Medicine, Vol. 187: 276-86.

European Commission (2021). “State of the Union 2021 —Letter of Intent,” https://ec.europa.eu/info/strategy/strategic-planning/state-union-addresses/state-union-2021_en, accessed 12 May 2022.

Gallagher, Aisling (2020). “A ‘Golden Child’ for Investors: The Assetization of Urban Childcare Property in New Zealand,” Urban Geography, Vol. 42, no. 10: 1440-58.

Gupta, Atul, Sabrina T. Howell, Constantine Yannelis, and Abhinav Gupta (2022). “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes,” National Bureau of Economic Research, Working Paper 28474, Cambridge, MA.

Harrington, Charlene, Frode F. Jacobsen, Justin Panos, Allyson Pollock, Shailen Sutaria, Marta Szebehely (2017). “Marketization in Long-Term Care: A Cross-Country Comparison of Large For-Profit Nursing Home Chains,” Health Services Insights, Vol. 10 January-December 2017.

Hawai’i State Commission on the Status of Women (2020). “Building Bridges, Not Walking on Backs: A Feminist Economic Recovery Plan for COVID-19.” Hawai’i Commission on the Status of Women: Honolulu, HI.

Hooda, Shailender Kumar (2020). “Health System in Transition in India: Journey from State Provisioning to Privatization,” World Review of Political Economy, Vol. 11, no. 4: 506-32.

Hunter, Benjamin M. and Susan F. Murray (2019). “Deconstructing the Financialization of Healthcare,” Development and Change, Vol. 50, no. 5: 1263-87.

International Finance Corporation (2009). “New Private Equity Fund Launched to Strengthen Health Care in Africa,” press release dated 4 June 2009, https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=21270, accessed 18 May 2022.

Kentikelenis, Alexander and Thomas Stubbs (2021). “Austerity Redux: The Post-Pandemic Wave of Budget Cuts and the Future of Global Public Health,” Global Policy Vol. 13, no. 1: 5-17.

Kose, M. Ayhan, P. Nagle, F. Ohnsorge, N. Sugawara (2021). “Debt Tsunami of the Pandemic,” https://www.brookings.edu/blog/future-development/2021/12/17/debt-tsunami-of-the-pandemic/, accessed 12 May 2022.

Lesotho Consumer Protection Association and Oxfam (2014). “A Dangerous Diversion: Will the IFC’s Flagship Health PPP Bankrupt Lesotho’s Ministry of Health?” Oxfam Briefing Note, 7 April 2014, https://oxfamilibrary.openrepository.com/bitstream/handle/10546/315183/bn-dangerous-diversion-lesotho-health-ppp-070414-en.pdf%3Bjsessionid=EF209DC67290A990DCDFB710D55734A7?sequence=1, accessed 13 May 2022.

Longhurst, Andrew, Sage Ponder, Margaret McGregor (2019). “Labor Restructuring and Nursing Home Privatization in British Columbia, Canada,” in P. Armstrong and H. Armstrong (eds.), The Privatization of Care: The Case of Nursing Homes. New York: Routledge.

Molinari, Nicole and Geraldine Pratt (2021). “Senior’s Long-Term Care in Canada: A Continuum of Soft to Brutal Privatization,” Antipode, February 2021: 1-21.

OECD/UNCDF (2020), Blended Finance in the Least Developed Countries 2020: Supporting a Resilient COVID-19 Recovery, OECD Publishing, Paris, (https://doi.org/10.1787/57620d04-en, accessed 15 July 2022).

Private Equity Stakeholder Project (2022). “Private Equity at Home: Wall Street’s Incursion into Healthcare and Hospice Industries,” https://pestakeholder.org/report/private-equity-at-home-wall-streets-incursion-into-the-home-healthcare-and-hospice-industries/, accessed 18 May 2022.

Rasmussen, Bergur Lokke and Alessandro Daffre (2020). “Real Estate Investment Trusts: An Industry Analysis with a Special Focus on Recessions and COVID-19,” Master Thesis submitted to the Copenhagen Business School, https://research-api.cbs.dk/ws/portalfiles/portal/62184702/881364_MasterThesis_9818_RealEstateInvestmentTrusts.pdf, accessed 13 May 2022.

Reuters (2022). “LIVE MARKETS ESG: A Look at the Fall of Orpea and Korian,” 4 February 2022.

Sello, Limpho (2021). “Lesotho: Netcare Hits Back, Accuses Gov’t of Breach of Contract,” Lesotho Times, 11 August 2021, https://allafrica.com/stories/202108120422.html, accessed 13 May 2022.

Scheffler, Richard M., Laura M. Alexander, and James R. Goodwin (2021). “Soaring Private Equity Investment in the Health Care Sector: Consolidation Accelerated, Competition Undermined, and Patients at Risk,” American Anti-Trust Institute and Petris Center, Berkeley, CA.

UN Department for Social and Economic Affairs (2022). “World Economic Situation and Prospects 2022,” https://www.un.org/development/desa/dpad/publication/world-economic-situation-and-prospects-2022/, accessed 12 May 2022.

UN Economic Commission for Latin America and the Caribbean and UN Women (2020). “Care in Latin America and the Caribbean during the COVID-19: Towards Comprehensive Systems to Strengthen Response and Recovery,” UN ECLAC and UN Women, Santiago, Chile.

UN Sustainable Stock Exchanges (2021). “How Exchanges Can Advance Gender Equality: Updated Guidance and Best Practice,” New York: UN SSE.

US Agency for International Development (n.d.). “Greater than the Sum of its Parts: Blended Finance Roadmap for Greater Health,” CII Investing for Impact Series. Washington, D.C.

Yip, Winnie and William Hsiao (2014). “Harnessing the Privatization of China’s Fragmented Health-Care Delivery,” The Lancet, Vol. 384, no. 9945: 805-18.

Notes

* Adviser, Care Economy and Partnership Engagements. UNI Global Union

1 Hawai’i State Commission on the Status of Women, 2020.

2 Armstrong, et al., 2020.

3 UN ECLAC and UN Women, 2020.

4 ASEAN, 2021.

5 EC, 2021.

6 UN DESA, 2022.

7 Kose, et al., 2021.

8 Kentikelenis and Stubbs, 2021.

9 Harrington, et al., 2017

10 Hooda, 2020; Hunter and Murray, 2019; Vural, 2017; Yip and Hsiao, 2014.

11 Molinari and Pratt, 2021; Longhurst, 2019.

12 Hunter and Murray, 2019.

13 Scheffler et al., 2021.

14 Davis, 2019.

15 Rasmussen and Daffre, 2021.

16 Gallagher, 2020.

17 UN SSE, 2021.

18 Reuters, 2022.

19 IFC, 2009.

20 USAID, n.d.

21 Attridge and Engen, 2019.

22 OECD/UNCDF, 2020.

23 Abuzaineh, et al. 2018.

24 Sello 2021.

25 PE Stakeholder Project, 2022.

26 Scheffler et al., 2021.

27 Gupta, et al., 2022.

28 Bourgeron, et al., 2021

29 Block and Hockett, 2022.

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New Release: Interest rate turnaround. A turning point for development finance?

26. September 2022 - 3:45

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Since the adoption of the 2030 Agenda on Sustainable Development, development finance has operated under conditions of low interest rates and high liquidity in global financial markets. This has changed with the recent turnaround in interest rates. The briefing paper Interest rate turnaround. A turning point for development finance? by Bodo Ellmers, describes the current trends, analyzes the implications for financing sustainable development in the Global South, and formulates policy recommendations on how countries in the Global South and their financing partners in the North can respond to the interest rate increases.

Since March 2022, the US Federal Reserve has been raising key interest rates at a record pace and in large steps. Developing countries in particular have had to follow suit in even larger steps in order to remain attractive as investment locations for volatile capital and to prevent massive capital outflows.

The implications are enormous and multifaceted. Escalating interest costs weigh heavily on developing countries’ budgets and absorb scarce resources needed for development and public goods. Capital flight and lack of liquidityin global financial markets mean that developing countries find it difficult to access new capital for investment in economic development and socio-ecological transformation, or only at prohibitively high costs. The number of countries in acute debt crises is threatening to grow rapidly.

The optimal mix of instruments in development finance changes with the level of interest rates. The turnaround of interest rates is also a gamechanger for development finance. It requires a fundamental policy shift. As interest rates rise, using private financing at market conditions is rational and affordable for fewer countries and for fewer purposes. At the same time, financing channels such as domestic financing from tax revenues or external financing from Official Development Assistance (ODA) grants become more important, as these are not dependent on interest rate levels.

The interest rate turnaround exacerbates the humanitarian emergency in the Global South, where populations have been hit hard by multiple energy, food, climate, and coronavirus crises. In the short term, the international community can provide liquidity to the Global South, for example, through a new issue of International Monetary Fund (IMF) Special Drawing Rights. Relief packages also need to be put in place in developing countries to protect vulnerable groups, and investment in sustainable development still needs to be scaled up under difficult conditions. Fair and effective taxation, debt relief and ODA grants can increase the fiscal space for this.

Interest rate turnaround
A turning point for development finance?

By Bodo Ellmers
Published by: Brot für die Welt, Misereor & Global Policy Forum Europe
Bonn, September 2022
www.globalpolicy.org

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Sustainable Development, Corporate Influence and Private Finance

15. September 2022 - 22:51

By Antje Hipkins and Elena Marmo

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Crucial to the achievement of the Sustainable Development Goals (SDGs) of the 2030 Agenda is SDG 17, “Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development”. Increasingly, discussions now take the form of multistakeholder partnerships and engagement with the business sector as a tool to mobilize finance for the SDGs or generate needed capacity – often to develop a pipeline of bankable projects. This partnership orientation has become a regular feature of the UN agenda, from the Economic and Social Council (ECOSOC) Operational Activities Segment in May 2022 to the High-Level Political Forum (HLPF) in July 2022.

On 17-19 May 2022, the ECOSOC Operational Activities Segment (OAS) highlighted the work of the UN, its funds and programmes, and their work towards implementing the 2030 Agenda and the SDGs in UN Country Programmes. Part of this discussion involves the implementation of the United Nations Development System (UNDS) Reform. Ushered in by A/RES/72/279, the reform seeks to improve how the UNDS delivers programming through its various UN Funds and Programmes in UN country activities. A highlight of these discussions was the chronic underfunding of the UN System, which has opened doors for private sector donors, and their interests and priorities. As Official Development Assistance (ODA) and core contributions from donor governments wane, funding to bridge the financing gap has to be sought elsewhere.

At the 2022 High-Level Political Forum, which focuses on national progress towards the SDGs, financing constraints were frequently referenced in efforts to achieve the SDGs and recover from the economic shocks of COVID-19. Since the onset of the pandemic, most countries’ economies have suffered substantially, and many governments have not had the capacity to prioritize achieving the SDGs over the immediate needs of their populations. As a result, many are embracing multi-stakeholder partnerships as an opportunity to acquire critical financing.

Inadequate funding for UNDS Activities

Throughout the ECOSOC OAS, UN leadership echoed concerns regarding the inadequacy of funding. In the Opening Session, then President of ECOSOC, Collen Vixen Kelapile appealed: “We also need to seriously address the critical funding gap of the UN Development Agencies, and close the often spoken about imbalance between core and non-core resources.”

Pakistan on behalf of G77 and China noted: “While the world is experiencing immediate humanitarian urgencies, we are also on the verge of a global development crisis and these cuts in core funding of the UNDS would have a lasting effect on the most vulnerable, stall the collective development trajectories over the last decades, [endanger the] well-being, and security of people in the developing world — as well as affect the institutions that are designed to deliver on the development aspirations.”

Malawi on behalf of LDCs urged: “Donor countries must fulfill their commitments.”

UN Secretary-General António Guterres echoed these concerns: “None of this can be achieved without adequate, predictable and sustainable funding to the UN Development System. This is indispensable to build incentives for collective work and integration.”

In a session focused on the Resident Coordinator System (and subsequently the projected funding gap in years to come), Deputy Secretary-General Amina Mohammed and Assistant Secretary-General Robert Piper reiterated the role of Member States in the Funding Compact, an agreed set of commitments between the UN and Member States which holds governments to financing the reforms being implemented by the UN agencies.

In an informal dialogue with Member States, Amina Mohammed urged: “We need the same scrutiny and interrogation of the Funding Compact because it’s a deal, it’s a handshake. We’ll do what you’ve asked us to do, and you’ll do what we’ve asked you to do so that we can get it done. That hasn’t happened. And it needs to happen.”

Robert Piper acknowledged that: “a fundamental shift is needed to the way the UN system is resourced – meaning that Member States need to take a deep look at the funding decisions, mechanisms, modalities and expectations they have, if they want to see the requested reforms become a reality”.

ECOSOC Vice President for OAS and Chargée d’Affaires of Finland Miia Rainne highlighted: “All of our development ambitions and efforts to save the SDGs are dependent on adequate, flexible and predictable funding for the UN Development System. This is also at the heart of the Funding Compact and includes a fully funded Resident Coordinator System.”

In the closing session, the ECOSOC President stressed the responsibility of Member States: “It is also up to us – the Member States – to undertake some transformative actions in our interactions with UN system entities and in our funding patterns.”

Competing Funding Priorities

Beyond the insufficient funding in general, UN leadership and Member States have highlighted the added complexity of a system-wide imbalance between humanitarian and development funding.

This was addressed by Malawi on behalf of the LDCs:

“The overall funding of the United Nations Development System is rising. However, regrettably, the share of the development funding has dropped to 30 percent in 2020. While humanitarian assistance is important, it should in no way be at the expense of development assistance. This will jeopardize the balance between the three pillars of sustainable development. Similarly, the core resources have dropped down to only 17 percent. We rely on you Mr. Secretary-General and our partners to secure the balance between the three pillars of sustainable development and between core and non-core resources.”

In the closing session, the ECOSOC Vice President highlighted: “While many Member States are struggling with fiscal constraints during these challenging times, addressing urgent humanitarian needs cannot come at the expense of funding for development. Less funding towards development activities today means more funding will be required to address humanitarian crises tomorrow.”

At the 2022 HLPF, Member States also emphasized the need for more funding dedicated specifically to environmental protection and increasing biodiversity. This was underlined during a special session dedicated to SDGs 14 and 15 – covering life below water and life on land respectively – by Switzerland:

“To have an impact, it is essential that this framework contains relevant, clear and measurable goals, targets and indicators, including a global goal of protecting and conserving 30 percent of the world’s ocean floor by 2030. Given the scale of the challenge, action by all sectors and actors is needed. The new framework for biodiversity must therefore be comprehensive and promote synergies, notably among all biodiversity-related agreements and relevant multilateral institutions.”

The need to involve a variety of sectors in this search for funding was especially emphasized by Finland:

“We need everybody to get on board. The private and public sectors, Indigenous peoples and local communities, academia, civil society and the landowners. By fulfilling the whole of society approach and to find new forms and measures to minimize harmful impacts on biodiversity is essential.”

The growing emphasis on humanitarian funding due to COVID-19, impacts of the climate crisis, the war in Ukraine, and the subsequent social, economic and food crises already developing, contribute to the scramble to sufficiently fund the development agenda.

Calls-to-action for the private sector

Despite widely documented concerns about inadequate funding, consensus is lacking with regard to how the problem should be addressed. Across the OAS sessions, some highlighted the role of donor governments, whereas others stressed the need to diversify donor bases and engage the private sector. In informal dialogue with Member States during the opening session of the ECOSOC OAS, the Secretary-General highlighted his envisioned role for the private sector:

“Now the private sector. First of all, one of the elements of this theme is on partnerships. So exactly to give the Resident Coordinator capacity to enhance partnerships of different sorts with, namely, the private sector. On the other hand, we have the Global Compact, and we are linking more and more the Global Compact to the UN Development System and are aware of the Group of Investors on Sustainable Development, which again, we are bringing more and more into support of the Resident Coordinator System. So, the partnership with the private sector is absolutely crucial.”

This connects to the Secretary-General’s focus on multistakeholderism and “networked multilateralism” within his Our Common Agenda report and process. Member States also favoured a diversification of the donor base and, in some cases, named the private sector and philanthropy directly.

During the OAS, the Permanent Representative of Oman noted the potential within the private sector, but also called for greater coordination and engagement with International Finance Institutions (IFIs):

“We need to think of how to build a more diversified donor base and to have equal and unconditional access to adequate funding, especially given the financial difficulties facing many developing countries which became more dire due to COVID-19 crisis. While noting, with appreciation, the increase of contributions from the private sector, we call for closer collaboration and engagement from the international financing institutions especially with the developing and the Least Developed countries that are mostly affected by recent challenges.”

Additionally, as inputs to the ECOSOC OAS included reports from Heads of UN Funds and Programmes, Member States received updates from several agencies that are conducting comprehensive private sector fundraising programmes. This topic is explored further in a previous briefing.

In a session on the Development Coordination Office (DCO), the Permanent Representative of New Zealand on behalf of the Corrections Association of NZ (CANZ) noted the success of some UN entities in attracting private finance and asked: “How can their experience help inform efforts by DCO to attract investment?”

The Permanent Representative of Canada echoed this:

“We share your concern regarding the chronic underfunding of the RC system. We see this also as a major risk in terms of sustaining reform going forward, particularly as we continue to grapple with extremely challenging economic and fiscal times and insurgencies.…And we would also encourage DCO to continue to find more pathways for investment with stronger engagement with philanthropies, private sector, and other partners to find a more sustainable way forward.”

Similarly, Gabon acknowledged in their Voluntary National Review (VNR) at the 2022 HLPF:

“Like the technical and financial partners, the private sector is, alongside the government, fully concerned by the implementation of the SDGs. Indeed, through growth, which is their main objective, companies distribute income, promote investment, creativity, innovation and technology that influence the modes of production and technology that influence production and consumption patterns.”

The 2022 HLPF Ministerial Declaration also reiterates this call to action for the private sector:

“We call upon multilateral development banks, other financial institutions and the private sector to enhance finance mobilization in order to deliver the scale of resources needed to achieve climate plans, particularly for adaptation, and encourage countries to continue to explore innovative approaches and instruments for mobilizing finance for adaptation from private sources.”

As the global situation becomes more complex and the lines between humanitarian assistance and development activities blur, attention must be paid to which voices count. With funding comes influence, and while funding from the private sector may solve short-term deficits, the consequence of their influence on the agenda in the long-term runs the risk of undermining, rather than implementing, key components of the 2030 Agenda.

Calling on the Global North

At the 2022 HLPF, many state and nonstate actors underlined the need for funding to flow from countries in the Global North to those in the Global South. As Dr. Bruno Oberle, General Director of the International Union for Conservation of Nature (IUCN), stated:

“We need, of course, finance to bring the machine up to speed. We need a substantial amount of money to be transferred from the Global North to the countries that have the biggest challenges, that are the big repositories of biodiversity, the mega-diverse countries in the Global South. And we need money from a variety of sources – public money, private money, different types of instruments.”

This sentiment was reiterated by Uruguay in its VNR:

“So, the speed of the change requires that we coordinate our efforts and more financial resources on the principle of joint responsibilities, but differentiated responsibilities.… We need more commitments in terms of per capita income and we must use more of our resources for development because unless there is growth, there will be no funds for financing. Nevertheless, we do know that countries are encountering major public financing problems, particularly worsened by COVID-19 and given the increased public debt.”

In its VNR, Switzerland outlined a way in which it is involving the private sector in partnership to raise funding to support global development initiatives:

“Alleviating global poverty and advancing sustainable development are the primary aims of all of the official development assistance (ODA) funding disbursed by Switzerland. Mobilizing additional private-sector resources has now also been adopted as one of the priorities of Switzerland’s International Cooperation Strategy 2021-24. The federal government supports the creation of frameworks that encourage investment and private-sector initiatives, access to markets and financial institutions, and decent employment opportunities.”

As Member States and UN leadership have detailed the urgency of scaling up financing for the SDGs, humanitarian crises and climate action, it is clear that greater regulation and accountability is needed. As new financing actors are invited to the table, caution must be exercised to prevent the norms, standards and values of the United Nations from being shaped, re-shaped or undermined by new actors.

Further reading:

Barbara Adams and Jens Martens, “Fit for whose purpose? Private funding and corporate influence in the United Nations,” Global Policy Forum, Bonn/ New York (2015).

Barbara Adams, “D1. MONEY TALKS AT THE WORLD HEALTH ORGANIZATION,” Global Health Watch (2017), p.245.

Barbara Adams, “Private finance and partnerships at the UN,” Routledge Handbook on the UN and Development (2020), Ch.12.

Barbara Adams, “D3. THE UNITED NATIONS, GLOBAL GOVERNANCE, AND THE TOLL OF FUNDING FAILURES,” Global Health Watch (2022), p. 369.

Elena Marmo, “How the UN Opened Its Doors to Private Funding and Networked Multilateralism” Global Policy Forum and Rosa Luxemburg Stiftung-New York Office, New York, (June 2022).

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Global South Voices at 2022 UN High-level Political Forum

8. September 2022 - 20:17

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By Antje Hipkins

Since the 2012 United Nations Conference on Sustainable Development (Rio+20), the United Nations has annually convened the High-level Political Forum (HLPF) under the auspices of the UN Economic and Social Council annually and at Summit level under the auspices of the General Assembly every four years. The HLPF is the main mechanism through which UN Member States assess global progress on meeting the Sustainable Development Goals (SDGs) set by the 2030 Agenda for Sustainable Development. Member States can present their country reports on achieving the Sustainable Development Goals through Voluntary National Reviews (VNRs). The main SDGs for review at the 2022 HLPF were SDG 4 on quality education, SDG 5 on gender equality, SDG 14 on life below water, SDG 15 on life on land, and SDG 17 on global partnerships, with an overall theme on how the COVID-19 pandemic has impacted development progress.

At the first High-level Political Forum held in person since the onset of the COVID-19 pandemic in July 2022, 44 countries presented VNRs, including many Least Developed Countries (LDCs) and Small Island Developing States (SIDS). These countries focused on progress toward achieving the 2030 Agenda and the impact of COVID-19 on countries’ development plans, progress on gender equality, specific vulnerabilities in the face of multiple global crises, and the urgency of increasing climate resilience. Some emphasized the importance of a shift away from reliance on Gross National Income (GNI) as a key measure of development, as well as concern about the ability of LDCs to continue developing sustainably after graduating from the category.

Multidimensional Vulnerability Index (MVI) and LDC Graduation

  • “It is clear that the use of Gross National Income for allocating countries’ access to finance does not, on its own, adequately capture the vulnerability and resilience dimensions of development, nor does it map well to the financing needs for development. Therefore, we propose the International Internal Resilience Capacity, the IRC, and the Recovery Duration Adjustor as a forward-looking framework that incorporates both vulnerability and resilience in addressing the development challenge and providing a more equitable tool to underpin access to concessional finance.”
    – Hyginus ‘Gene’ Leon, President, Caribbean Development Bank (CDB)
  • “While we are defined as middle-income countries our development pathways are very different and not the same as other middle-income countries. Using a criterion only based on economics does nothing but prohibit Small Island States’ ability to become more resilient and achieve the highest level of sustainable development.”
    – Dr. Aubrey Webson, UN Ambassador, Antigua and Barbuda, on behalf of the Alliance of Small Island States (AOSIS)
  • “The MVI is intended to complement GNI per capita. To provide developing countries the opportunity to access the support they need at the global level, based also on their structural vulnerabilities, and not only on indices that have little relevance to their real needs.”
    – Gaston Browne, Prime Minister, Antigua and Barbuda
  • “Nepal is set to graduate from the LDC status in 2026. Graduation is a milestone for a country moving towards sustainable development, though, it will affect access to concessional development finance and trade preferences. Therefore, we are preparing a graduation strategy in such a way that it will minimize the negative consequences and ensure smooth and irreversible graduation.”
    – Dr. Biswo Nath Poudel, Vice-Chairman, National Planning Commission, Nepal
  • “As for its work on the Least Developed Countries, the committee welcomes the significant progress made towards graduation from the LDC category over the past decade… The committee expressed its concern and the limited capacity of these countries to address the diverse challenges they face. Reduced fiscal space, a problem aggravated by the COVID-19 crisis, makes it difficult to reconcile short-term recovery with long-term sustainable development.”
    – José Antonio Ocampo, Minister of Finance and Public Credit, Colombia, Chair, Committee for Development Policy

Impact of COVID-19 on economic and social development

  • “Limited fiscal space has constrained the ability of Least Developed Countries to take [COVID-19] stimulus measures, including enhanced social protection, and might be further reduced owing to the increasing costs of borrowing. Debt burdens and increasing debt servicing costs are becoming increasingly challenging for these countries, placing them at higher risk of debt distress.”
    UNGA Secretariat, Background Note for session entitled: “African countries, Least Developed Countries and Landlocked Developing Countries: Ensuring equal access to vaccines and resources in the poorest countries”
  • “The COVID-19 pandemic has triggered high levels of poverty, hunger and malnutrition, and inequality in administration of COVID-19 vaccines. The pandemic triggered a global recession with LDCs, LLDCs, and African countries witnessing a significant shrink in their respective economies. External debt burden and debt service obligations have risen in the past three years resulting in inadequate fiscal space for sustainable development.”
    – Mr. Saitoti Torome, Principal Secretary, State Department for Planning, Kenya
  • “COVID-19’s effects on the economy have been substantial, with Somalia’s GDP dropping to -0.3 percent in 2020, compared to the 3.2 percent growth predicted for the same year.”
    Somalia VNR Report
  • “The COVID-19 pandemic, climate change, and the recent unprecedented civil unrest present a recent threat to the gains made in reducing extreme poverty by 8 percentage points and poverty by about 4 percentage points between 2010 and 2017. The pandemic has worsened the problems of high unemployment, poverty, inequality, and economic growth. It is anticipated that the proportion of the population living below the national poverty line will increase within the range of 2.3 percent to 5.6 percent as a result of the emerging challenges.”
    Eswatini VNR Report
  • “COVID-19 is estimated to increase the incidence of poverty to 25 percent of the population. This is coupled with the current low coverage of social protection, generally high food inflation, high unemployment rate among PWDs and youth, as well as disparities in access to basic services such as health, sanitation, and nutrition.”
    Ghana VNR Report
  • “COVID-19 has heightened the threat to food security which is also being fuelled by climate change and biodiversity loss, recurring extreme weather events. Droughts and erratic rainfall pattern spells are linked to significant crop failures, declining agricultural production and productivity affecting rural livelihood opportunities, undermining the country’s attainment of Zero hunger and poverty reduction efforts.”
    – Fatou Kinteh, Minister for Gender, Children and Social Welfare, Gambia
  • “In the past two years, the food security and nutrition of billions of people has been further undermined by the COVID-19 pandemic, and its ripple effects are still felt across the globe. The measures to contain the pandemic and the scars it has left on global food supply chains have resulted in severe worldwide economic contractions. Today, with the pandemic ongoing and war raging in Ukraine, the global scenario is even more complex, with competing challenges calling for concerted solutions.”
    – Amina Mohammed, UN Deputy Secretary-General

Progress on Gender Equality

  • “Gender equality is a reality in Togo and this is the first Prime Minister of Togo that is a female. I can say that we are committed to the participation by women in political and social life. Thirty-five percent of government officials are women and the majority are in strategic posts. The National Assembly has 20 percent of female members. It’s also chaired by a woman. We launched a year ago the African Women Programme of Excellence [which bolsters] the capacity of young girls in leadership and in entrepreneurship.”
    – Simfeitcheou Pre, Minister and Special Advisor to the President, Republic of Togo
  • “Equal access by the whole population to economic benefits is a guarantee for the success of our ambition. In that regard, Togo has made massive investments in the economic empowerment of women through the National Inclusive Finance Fund. That fund was created in 2014, and it’s promoted over 180 million U.S. dollars to nearly 2 million beneficiaries; ninety-five percent of them are women.”
    – Simfeitcheou Pre, Minister and Special Advisor to the President, Republic of Togo
  • “In 2020, we established a development division in the Institute of Women with an emphasis on their economic autonomy and also a working group of our National Gender Council to ensure that women are employed and that there is professional training for women. On the other hand, the National Institute of Women developed a programme to enhance the political participation of women.”
    – Isaac Alfie Stochek, Head of the Office of Planning and Budget, Uruguay
  • “There’s an urgent need for countries to strengthen their fiscal systems. Because if we don’t set into place the resources that support women and support the education system, then we will not move populations forward, we will not raise living standards, we will not reduce discrimination…. We see more and more women at lower levels, less and less women at higher levels, this needs to also start to change. And when we move people into the workplace, the fact that the informal sector is dominated by women has also got a lot to do with the fact that many women have not received the same access to education and therefore are resorting to the informal sector, in order to earn a living and support themselves.”
    – Attiya Waris, UN Independent Expert on Debt
  • “I ask myself, what do you do when you are late for a meeting? You run, don’t you? Well, this is the time to run. We have dates. Time is moving forward and we are lagging behind. And worse still, in many regions, we’re even going backwards. With great anger, and sorrow, today, I stand here, where my colleagues are resisting a violent attack on their reproductive rights. An attack that reverberates in public health discussions around the world. And COVID was not the one who signed this.”
    – Valentina Munoz Rabanal, SDG Advocate, Youth Feminist Activist, and Digital Rights Advocate, Chile
  • “We need to make progress: poverty and hunger across the world are affecting our people throughout the world, and it is women, children, those who are worst off who suffer the most. This is why we have to come up with some formula to respond to the situation…. when you are thinking of this solution, remember there are women and men, but essentially women, who are defending themselves, who are killed defending their land. In honor of their memory, please, please stand up for them, leave aside your own interests and think of all those that are in need and to whom we have a duty.”
    – Mabel Bianco, President of the Fundación para Estudio e Investigación de la Mujer, Argentina; Co-Chair of the Coordination Mechanism of Major Groups and other Stakeholders (MGoS)

Vulnerability to Climate Disasters and Increasing Climate Resilience

  • “The adverse impacts of climate change pervade the entire life of Tuvalu and it is the foremost challenge of the country. Erosion, storm events, tidal flooding, saltwater intrusion, drought conditions and bug infestation of trees and plants, are some of the events that are undoing the progress that has been achieved to date. More funding and technical assistance are needed to continue work on adaptive infrastructure, food security, water, transport, communication, alternative energy, coastal protection and land reclamation.”
    – Samuelu Laloniu, UN Permanent Representative, Tuvalu
  • “There has been a two-fold increase in strong hurricanes in the Caribbean, within the last decade. This trend will only worsen if global warming remains unchecked. Hurricane Irma in 2017 wreaked absolute havoc in Barbuda. Five years later, we are still struggling to rebuild to the status quo ante, including to build back better. If the global financial system remains as it is, we will never be able to afford another Hurricane Irma.”
    – Gaston Browne, Prime Minister, Antigua and Barbuda
  • “Indeed, in recent years, STP has been faced with rising sea levels, deforestation, intense and uncontrolled rainfall, floods, and landslides, with a devastating effect on food crops production and exports. Furthermore, there has been a decrease in precipitation, with negative impacts for water supply. These development issues hamper activities linked to the agriculture, tourism and fishing sectors, movement of people and goods, with devastating impacts on the economy and directly endanger the lives of the populations.”
    – Edite Ramos da Costa Ten Jua, Minister for Foreign Affairs, Cooperation and Communities of the Democratic Republic, Sao Tome and Principe
  • “A major aspect of wealth lies in its natural resources and biodiversity. But the country is one of the most vulnerable to climate change and sea level rise has begun to affect the coastal region, threatening seventy percent of the population living along the coast.”
    – Jose Carlos Casimiro Varela, Minister of Economy, Planning and Regional Integration, Guinea-Bissau
  • “Climate change mitigation and adaptation, halting biodiversity loss, reducing land degradation and restoring ecosystems are priorities. Water and soil conservation programmes are being expanded, enclosures and protected areas have been established, greening and irrigation schemes are proceeding, and a vast network of terraces, dams and ponds has been constructed. There are plans for desalination of sea water for domestic use and economic sectors, while degraded land is being restored and rehabilitated.”
    – Sofia Tesfamariam, UN Permanent Representative, Eritrea
  • “The recent reports from the IPCC in February on adaptation and in May on mitigation have brought us this message very clearly, that we have to peak before 2025 if we have to save the target of 1.5 degrees Celsius. We see very little effort toward that goal.”
    – Ajay Jha, India, Co-Chair of the MGoS Coordination Mechanism

Holding the Global North accountable

  • “The tone policing that we get from our colleagues in the global North is really problematic. That they call us emotional when we see the destruction in our countries, that they call us irrational, that they call us over the top, and with the implication of a colonial mindset as well, that the rationality is coming from the passivity and the lack of action of our global North colleagues…. What we are seeing in INGOs, what we are seeing in organizations in the global North who call themselves our allies, are precisely merging themselves with a system that is criminal.…After the IPCC report was launched, we realized that we only have three years to make a complete systems change. And this doesn’t mean that everybody has the same responsibility and needs to act in the same way. It means that the rich countries need to act and that the global South, women, Indigenous Peoples have subsidized the Global North enough….”
    – Emilia Reyes, Programme Director, Policies and Budgets for Equality and Sustainable Development, Equidad de Género: Ciudadanía, Trabajo Familia, Mexico
  • “What’s the cause for this distrust? The cause for this distrust is very well-founded and it is that nobody is trusting the global North anymore, I hope, because they shouldn’t. Never, never, ever, trust the global North, and by the global North I mean countries from Western Europe, North America, maybe some in the Pacific, well-off countries that have a lot of power and a lot of money. Because frankly, if we look at the historical responsibility… the whole system that we’re facing… this is not a system that just came out of the ground and came into existence by chance or anything, it was built and it was designed to be exactly that way. So what we’re seeing, the whole economic system, that whole system of inequalities, of extractionism, of exploitation, that is something that people built and they wanted it to be and work exactly the way it is working.”
    – Wolfgang Obenland, NGO Forum on the Environment and Development, Germany

Many of the VNRs delivered by representatives of SIDS and LDCs, as well as the sessions dedicated to these countries, elaborated that LDCs and SIDS have faced major setbacks in achieving the SDGs and their own countries’ development goals, due heavily to the concurrent crises of COVID-19 and climate change. Many of these countries produce very little emissions harmful to the environment, yet they are among the most vulnerable to flooding due to rising sea levels, droughts, torrential rains, and other climate disasters.

Many LDCs and SIDS have enacted laws and adopted plans to work towards gender equality. While progress has been made, the presentations by Guinea-Bissau and Liberia, for instance, named Female Genital Mutilation as a persistent hurdle toward achieving gender equality. These and other LDCs acknowledged that more work needs to be done to prioritize gender equality. Other developing countries stated that while achieving the SDGs remains a top priority, it is especially difficult for their governments to fund all the programmes necessary to work towards their achievement. As the midpoint for the 2030 Agenda approaches, the results of the mid-term review at the 2023 SDG Summit will be critical to chart a correction course as well as adopt robust new measures and commitments.

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