FINANCING FOR DEVELOPMENT

In March 2002, Mexico hosted the UN Financing for Development (FfD) conference, marking a historical event as this is the first time the UN takes the issue of development finance to its own agenda at the scale of an international conference. The objectives included to find ways out of the permanent financial crisis of the developing countries. Also on the agenda was the role of private capital flows and potential reforms of the international financial architecture, an area that has been dominated by the World Bank, the International Monetary Fund (IMF) and the World Trade Organisation (WTO).

The level of official resource flows has always been a bone of contention in the North-South negotiations. The fact that these discussions have assumed a new quality today is above all due to changes in the global framework conditions. Competition between the two systems in the East and the West has ceased, trans-national private capital flows have grown rapidly in the course of worldwide liberalisation and deregulation, and global problems have intensified. Official Development Assistance (ODA) has declined substantially during the nineties. With a few exceptions, developed countries have failed to allocate the promised 0.7% of their GDP for development assistance. Aid fell to a mere 0.22%, and less than a third of this aid has been directed to the Least Developed Countries (LDC), indicating a lack of political will to give the poorest people in the poorest countries a political priority. Increasing wealth in the rich countries goes well along with decreasing generosity on the issue of development finances. At the same time, Foreign Direct Investment (FDI) has increased, from US$ 43 billion to US$ 252 billion. As this private money flows watch out for best profit options, they are extremely unevenly distributed and focus on Asian countries like China; the poor countries e.g. of sub-Saharan Africa are left behind as a consequence of the prevailing economic philosophies attracting foreign capital of the private sector (No surprise that, in 1998, 55% of FDI went to just five countries and the 48 Lease Developed Countries did not even attract one percent).

Poverty eradication has become a leitmotif for co-operation between North and South. Even if this goal is anything but new, the degree to which it has become a common priority does seem remarkable. Only recently, Great Britain and Germany passed national action programmes to combat poverty; the EU and the ACP states assigned the task of poverty eradication a key role in their new partnership agreement; the World Bank is now making debt reducing measures for the highly indebted poorest countries conditional on the compilation of Poverty Reduction Strategy Papers (PRSP), and in 1999, even the IMF renamed its Enhanced Structural Adjustment Facility (ESAF) a Poverty Reduction and Growth Facility (PRGF). At the UN´s Millennium Summit in September 2000 the Heads of State and Government committed themselves in their joint declaration to reach a number of International Development Targets by 2015, including halving the share of people living in absolute poverty, i.e. on less than one US$ a day. The broad consensus on the (new) development policy priority is hardly surprising. Getting rid of poverty is an undisputed goal as long as it remains nothing more than an empty phrase that can be filled in with a random choice of political contents. As soon as it comes to defining concrete measures and approaches to reach this goal, there is no consensus at all. For what will inevitably be at stake then is the (re-) distribution of resources, which is hard to accomplished without conflicts in society. Therefore, the consensus on the goal of poverty alleviation cannot be separated from the conflict over the distribution of resources required to this end. This once again brings us back to the issue of financial flows between the North and the South and the future of ODA that needs to address the underlying causes of poverty and uneven power relations. Development finance is not to be wasted on projects that enhance the prestige or suit the convenience of the donor or the recipient - with little or no relevance to the poorest people.