At this year's National Conference "International development in a changing world", leading thinkers, campaigners and practitioners came together to debate the most current topics in international development. RESULTS campaigner Charlie Ensor has put together his reflections on what the role of the private sector, governments and institutions are in providing economic opportunities for all and overcoming poverty.
Last July, the Addis Ababa Financing for Development Summit promised to bring about a change in the way that international development finance operates. The summit looked at different ways of financing the new Sustainable Development goals, alongside traditional aid flows from donor governments. From domestic resource mobilisation, to a renewed and more active private sector, panellists at the recent Results National Conference grappled with what the new financing agenda could look like. This included:
- A social contract to meet the SDGs, whose wording commits countries to creating sustainable and effective education and health and social protection systems, with national spending targets. It remains to be seen whether these are reflected in policy change as the SDGs are not legally binding.
- Recommitments for donors to commit to the target of spending 0.7% of gross national income (GNI) on aid, greatly raising capital for donor countries to fund the SDGs, in an age in which the world’s humanitarian responses faces chronic funding shortages.
- Domestic resource mobilisation, requiring stronger commitments from government to collect more taxes fight tax evasion and deal with illicit financial flows.
- The private sector's increasing role in fostering longer-term investments, moving away from passive involvement towards a more active and participatory role in funding aid and development.
Ewan Livingston, Senior Advocacy Adviser at Action Aid, said that “the IMF estimates that tax avoidance costs the developing world $200 billion USD every year”, adding that by some estimates this accounts for around 1.3% per cent of GDP in the developing world. He added that 8 per cent of tax revenues [in developed countries] comes from corporate income taxes; on average in developing countries, that’s 16 per cent, a figure that could feasibly pay for an entire education budget, for example”. With losses at this level, much of the capital needed to fight global poverty is lost.
It is not just unjust tax systems which are harming global development and economic growth, but also economic models which have fostered inequality and poverty throughout the world. A damning assessment of the neo-liberal model of economic growth is given by the IMF in a recent report which urges a rethink about how growth can be better distributed. For Amy Dodd, Director of the UK Aid Network, this means a “shift away from responsibility to sustainability”, where social businesses and corporates have started to work together more with NGOs and aid agencies.
In the past a lot of focus was on GDP growth, which has not necessarily resulted in poverty reduction. A new approach is needed to ensure that economic growth, necessary to allow us to go beyond aid, delivers social goals. A burgeoning private sector has been increasingly working in partnership with NGOs. There was some agreement that these partnerships mark an opportunity to use the scale, resource and probably some of the agility that the private sector has, and in order to meet the SDGs, the private sector has an increase role to play. However, this movement towards corporate partnerships is rife with risk from an NGO perspective. In recent years, UK aid has been increasingly spent using private sector partners, which has been criticised by some organisations such as Global Justice Now, who have published a report highlighting the amount of money spent by DFID though private consultancy firms. Work is being done by many organisations who see the private sector as having a positive role to play in development, but development actors need to work on such projects carefully in order for them to be long term investments which are sustainable.
A great example of this is polio vaccination. Private sector involvement with the private sector has arguably brought about much of the successes of tackling polio as it has in vaccinating 1.3 million children against preventable diseases through GlaxoSmithKline’s partnership with Save the Children, or ensuring 10 million children go to school as part of Unicef’s partnership with Unilever.
The financing of the Sustainable Development Goals will look very different from the previous Millennium Development Goals, and it is clear that there will be an increased role for the private sector to play. Leveraging domestic resources requires building the capacity of institutions to collect tax, which can, in part, be supported by aid flows which fund and support the strengthening of governance systems. Efficient and effective taxation can build the foundations on which the SDGs can be achieved, allowing developing countries to fund their own development targets.
Aptly summing up the importance of aid in facilitating economic growth, RESULTS UK trustee Tina Bytheway stated: “I don’t so much think about beyond aid, but I think much more about aid and beyond."