Most media reports have cast the outcome of the Financing for Development Conference in Monterrey, Mexico in an overwhelmingly positive light. For example South Africa’s Business Day newspaper noted that it ‘resulted in a consensus that wealthy nations had an obligation to provide more development aid and slash trade barriers while poor nations were obliged to make sure that the money was well spent. United States President Bush pledged an additional $10bn over three years, tied to political, legal and economic reforms, while the EU promised that its contribution would rise over several years to reach $7bn a year by 2006. At present the United States gives about $10bn a year and the EU $25bn a year.
However, responses have been more wide ranging than such reports suggest. They include approval for the increased commitments from developing country governments, qualified by calls to address a wide range of outstanding issues, and strong criticism for the failure to address the fundamental problems underlying the Washington Consensus on development from civil society critics of this approach. Here we look at some of these responses and at conflicting assessments of the outcome of the conference.
5.1 SADC perspectives
Several SADC leaders made statements at the Financing for Development Conference in Monterrey.
South African President Thabo Mbeki characterised the conference as a declaration of commitment by world leaders to the people of the world to ‘eradicate poverty, achieve sustained economic growth and promote sustainable development as we advance to a fully inclusive and equitable global economic system.’
He welcomed commitments to increase official development assistance (ODA), but pointed out that more is needed. The commitments came in a context that has seen ODA declining from an average 0.35% of developed country GNP in 1990 to a present level of 0.23%, without ever approaching the 0.7% level committed. Post Doha negotiations on international trade need to increase access to markets for developing countries and address agricultural subsidies in the OECD countries. He noted the need for drastic revision of the Heavily Indebted Poor Countries (HIPC) initiative if it was to stem the flow of capital from the poorest countries and enable them to improve public services and infrastructure.
Mbeki called for partnership between North and South in these endeavours, as envisaged in NEPAD, and for greater coherence between the multilateral development institutions. He ended by pointing out that the skills and resources to end poverty are available. The Johannesburg World Summit on Sustainable Development needed to continue the process by detailing how to employ the finances committed at Monterrey.
President Festus Mogae of Botswana noted that while individual countries have the primary responsibility for their advancement, development remains a global challenge with the global community setting many of the parameters.
Increased efficiency in applying development finance is important but should not be used to deny aid. At the same time developing countries need to ensure good governance and appropriate social and economic policies that recognise the roles of private sector, civil society and other stakeholders. The practice of using aid to promote economic activity in donor countries distorts economic development in recipient countries.
He calls for support for NEPAD and the fight against the HIV/AIDS pandemic in Botswana. In addition to ODA, development cooperation should extend to trade, private sector development, private investment, technology access and equitable and inclusive global governance.
Small and middle income countries that show real commitment to good governance, the rule of law and economic reform but fail to attract private investment need support. He echoed Mbeki’s calls on trade, the ‘primary means’ for integrating developing countries into the global economy, and on the need for greater coherence in the approaches of UN and the multilateral development institutions.
Mogae called on the UN to follow up on concrete proposals such as the international tax system to finance development proposed in the Zedillo report commissioned by the UN in preparation for the conference. He ends with the hope that the conference signals the start of a new era of development cooperation based on strong political commitment from developed and developing countries, coordinated by the multilateral institutions. Achieving this requires clear mechanisms to monitor implementation of conference resolutions and progress towards the Millennium Development Goals.
The Tanzanian representative, Jakaya Kikwete, Minister for Foreign Affairs and International Cooperation, also welcomed the increased commitments but notes that more development assistance will be needed to reach the Millennium Development Goals. He notes improvements in the HIPC initiative but draws attention to the failure of non Paris Club creditors to participate in the initiative, and the impact on poverty reduction expenditure of excluding domestic debt and contingent liabilities from the debt sustainability analysis.
He recognises the importance of trade in promoting faster economic growth and development but points out that developing countries need the capacity to produce competitive goods in order to take advantage of market opportunities. They cannot develop prosperous economies and reduce poverty on the basis of trading raw cashew nuts and other primary products to finance imports of industrial goods. Subsidies, particularly of agricultural products pose an impossible challenge to developing countries in areas where they have comparative advantages. Globalisation only presents an opportunity to all nations if developing countries are given a fair chance. He notes that political social and economic reforms have not led to the expected flows of foreign direct investment and calls on developed country governments and the Western media to encourage more direct investment.
He ends by calling on both developed and developing countries to meet the commitments made at the conference.
5.2 A civil society view
This civil society response takes the form of an evaluation of the conference by Neville Gabriel. He is the Director of the Justice and Peace Department of the Southern African Catholic Bishops Conference, a member of the national executive of Jubilee South Africa, which campaigns for debt relief, and a member of the board of Transparency South Africa. Writing in his private capacity, Gabriel cites many of the same issues raised by the SADC leaders but comes to different conclusions about their meaning for poverty reduction.
He begins by noting that the Monterrey conference ‘offered a unique opportunity for world leaders to spawn a new spirit of democracy, transparency, accountability, and justice in global political, economic, and social development thinking,’ in response to growing international pressure from social movements and civil society organisations against increasing poverty, inequality and economic instability associated with globalisation informed by the Washington Consensus. The opportunity was unique because of the wide range of stakeholders from international finance institutions, private sector, non governmental organisations and government representing a range of sectors as well as finance departments that the UN assembled for the conference. However he argues that the resulting Monterrey Consensus fails to further the achievement of the millennium development goals (MDGs).
He notes a number of areas of failure.
Gabriel argues that the focus on increased aid commitments is deceptive, with most of the US aid in the form of technical assistance, which he reads as policy advice, support to private business, which he sees taking the form of credit guarantees to US multinationals, removal of exchange controls and trade tariffs, and privatised health care and education. All of it will go to countries that ‘follow a “vigorous growth agenda” that “encourages private enterprise through market-oriented mechanisms’. While the EU is prepared to go further on debt cancellation, global governance, and trade issues, it was not prepared to argue for this at the conference, or to discontinue heavy developed country agriculture subsidies.
- No substantial progress on problems confronting the HIPC debt relief initiative despite well developed civil society proposals for a legal mechanism to break the political impasse in the debt cancellation debate.
- Half hearted interest in the international currency transaction tax that could provide the additional $50bn in development funding necessary to meet the MDGs
- Not addressing the need for more representative global governance mechanisms in the UN, IMF and World Bank
Overall, policies to overcome poverty remain centred on trade and foreign direct investment, despite evidence of their detrimental impact on the poor. For these reasons the civil society caucus at the conference refused to endorse the consensus.
South Africa’s role
Gabriel goes on to look at South Africa’s role at the conference. While noting that President Mbeki has placed the conference in an ongoing process with the World Summit on Sustainable Development (WSSD) in Johannesburg the next, he draws attention to a point made by Finance Minister Trevor Manuel ‘that the Johannesburg Summit should have preceded the Monterrey Conference if financing mechanisms were to conform to development needs rather than the other way around.’ This means that political considerations and development needs will have to comply with the agreed economic framework.
He links President Mbeki’s acceptance of the Monterrey Consensus to the favourable reception the conference gave to the New Partnership for African Development (NEPAD), with its emphasis on wealth creation and private investment as keys to African development. He notes the key role South Africa is increasingly playing in the international development arena, with Trevor Manuel chairing the World Bank’s key policy body, the Development Committee, a role that hosting the WSSD will consolidate. However he argues that the constraints on environmentally responsible socio-economic development will not be resolved until the structural problems of international power relations are addressed. In summing up he observes that poor people will reserve their support until there is real change in their situation.
For more information got to www.sarpn.org.za and www.un.org/esa/ffd/