Innovative Financing for Development
Table des matières
"In four years, we’ve moved from utopia to action"
Cyrille Pierre, New York, 3 June 2010, at a meeting on innovative financing for development.
"Together with its partners in the Leading Group, France has been fully engaged in the search for innovative financing for development. It was instrumental in the creation of the Task Force on International Financial Transactions for Development. We must go further"(excerpt from a statement of France at the UN, March 23, 2010).
1. Latest developments in New York 
An informal event was held on 3 June 2010 in New York on Innovative Sources of Development Finance. It was chaired by Mr. Philippe Douste-Blazy, Special Adviser to the Secretary-General on innovative financing for development. Mr. Cyrille Pierre, Deputy Director for Global Economic Affairs and Development Strategy, at the French Ministry of Foreign Affairs participated in the meeting (see the programme of the event). A concept note by the UN Secretariat presented the state of play on innovative financing for development.
In his speech, Mr Cyrille Pierre presented the activities of the Leading Group on Innovative Financing: "in four years, we’ve moved from utopia to action". He tackled many myths about innovative financing:
Innovative financing for development is not designed to be a substitute for ODA. It is complementary.
Innovative financing does not address only the issue of taxes. All types of funding are envisaged (see below).
Global taxes implemented or envisaged are no threat to the sovereignty of States. The idea is to coordinate such taxes regarding their base, their rates, and their use, but not to impose new taxes to States.
The proposed fees are not distortive, because the amounts are very small.
Innovative financing does not complicate the international architecture, rather it is within the framework of priorities agreed by the UN (medicine, education for all, fight against pandemics) and contributes to the efficiency of aid, through the association of beneficiary countries to the management of collected funds.
Mr. Pierre stressed the crucial role played by the United Nations: the principle of innovative financing was launched in Monterrey, reaffirmed in Doha. "The UN must be the universal forum for raising such topics" concluded Mr. Pierre.
2. Overview
Key features
Innovative financing was mentioned in 2002 in the Monterrey Consensus on Financing for Development (paragraph 44 states that it is “important to find innovative sources of financing.” The final statement of the Doha Follow-up Conference (December 2008) also mentions innovative financing (paragraph 51); it recognizes the “considerable progress made since the Monterrey Consensus regarding voluntary innovative sources of finance for development and the innovative programs linked to them,” and encourages the “scaling up and the implementation of innovative sources of finance initiatives.”
Features of innovative financing:
— Additional financing mechanisms compared with traditional ODA;
— Predictability and stability of financing in order to meet long-term requirements (e.g. access to essential medications);
— Response to global market failures (particularly with regard to medication: lack of creditworthiness of the beneficiary, lack of return on private capital flows);
— Between bilateral and multilateral assistance, a model based on collective management of new resources developed jointly through North-South cooperation;
— Global solidarity mechanisms, based on utilizing the dividends of globalization (using the financial markets (IFFIm), contributions from economic sectors that benefit from globalization (contributions on airline tickets)).
Innovative financing uses essentially four types of mechanisms:
— Mandatory contributions (see below: levies on air tickets to finance UNITAID)
— Voluntary or “citizen” contributions (see Massivegood)
— Mechanisms for loans guaranteed by the States (see IFFIm)
— Public-private partnerships aimed at ensuring solvent demand (see AMC)
France participates in the Leading Group on Innovative Financing for Development
France has been involved in the debate on innovative financing for a long time now. The 2004 report on the “new international financial contributions” known as the "Landau report" showed why new contributions were needed, in addition to the current forms of development assistance. It listed in particular the types of contributions, both voluntary and mandatory (environmental taxes, taxes on financial transactions, etc.), capable of providing increased and more effective financing for development in the 21st century.
In January 2004 in Geneva, the presidents of Brazil, Chile and France launched, with the support of the United Nations Secretary-General, an initiative aimed at fighting hunger and poverty. This initiative urged the international community to develop new sources of financing for development in order to make progress towards achieving the Millennium Development Goals.
At the 2005 World Summit, 79 countries approved the New York Declaration on Innovative Sources of Financing for Development, co-sponsored by Algeria, Brazil, Chile, France, Germany and Spain.
The main forum for the discussion and proposal of innovative financing mechanisms is the “Leading Group on Innovative Financing for Development.” France hosts the group’s permanent secretariat. The group was established in 2006 following a ministerial conference in Paris on innovative financing mechanisms and brings together 59 countries, with varying levels of development, and works with the main international organizations (notably the World Bank, World Health Organization, and UNICEF), as well NGOs.
The Leading Group has identified new areas for allocating assistance, in addition to those related to health challenges, such as climate change and education and is working on establishing broad-based mechanisms capable of generating significant revenue for development. The Task Force on International Financial Transactions for Development, within the Leading Group, is working in this direction. This task force was established in May 2009 and brings together about a dozen States, including France. It met in Paris in October 2009 at the ministerial level.
The Leading Group has requested a report of international expertise on the technical and legal feasibility of these mechanisms. The report, "Globalising Solidarity: the case for financial contributions", based on numerous hearings conducted in New York, London, Paris, Brussels, Oslo and Brasilia, was delivered on 16 July 2010.
It analyzes five options for development financing, including an international levy on currency transactions and a tax on all financial transactions, confirming their technical, economic and legal feasibility.
" On Wednesday 1 September 2010 Bernard Kouchner will preside over the working group on international financial transactions and development that brings together 12 countries on this issue (…)
We are delayed in accomplishing the MDGs while new financial needs related to climate change have emerged. We must be innovative in finding stable resources for development (MDGs) and for the climate challenge: financing globalized activities, providing a broad funding tax base that could, via an infinitesimal contribution, make a significant change. Today, the daily volume of exchange transactions in the world is around $3.6 billion. Five cents charged for every $1,000 traded would bring more than 30 billion per year.
The $30 billion a year are to be compared with the $16 billion that would educate all children from low-income countries or $28 to 50 billion that could be used to fight against the three major pandemics (HIV, malaria, tuberculosis).
In New York, at the MDGs Summit, France is expected to make strong commitments for her future presidency of the G20. Since May 2009, the subject of a tax on financial transactions is no longer taboo, and we welcome this development. Europe, the G20, the IMF have taken a position on this issue, and even the UN has discussed the matter. What seemed impossible is now being considered or even implemented.
Bernard Kouchner believes that efforts to save the banking system would be better understood by civil societies and the developing countries if we collectively implement a infinitesimal contribution on sectors which have most widely benefited from globalization and played a major role in the current crisis."
Main initiatives
Three key initiatives have been implemented: the UNITAID central drug purchasing facility, the massive pre-financing mechanism of the IFFIm and the Advanced Market Commitment for the pneumococcal vaccine. France participates in UNITAID and the IFFIm and helped establish these initiatives.
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UNITAID is a central drug purchasing facility, responsible for centralizing the purchase of medications in order to achieve the best possible prices, in particular for developing countries.
UNITAID was created in September 2006 at France and Brazil’s initiative.
UNITAID is financed in particular through a solidarity levy on air tickets, adopted by 11 countries, including France. A voluntary solidarity contribution in support of UNITAID was also introduced in March 2010 and allows air travelers to add $2 to the price of their air tickets, within the framework of the Massivegood project of the Millennium Foundation for Innovative Financing, an independent not-for-profit foundation. This voluntary solidarity contribution was officially launched on March 4, 2010, at the United Nations Headquarters in the presence of Ban Ki-moon, United Nations Secretary-General, and Bill Clinton.
— The International Finance Facility for Immunization (IFFIm) is a massive pre-financing mechanism based on loan guarantees, introduced in 2006 at France and the United Kingdom’s initiative. Funds are raised by issuing bonds on the basis of donors’ pledges (countries or private foundations). These are bought on financial markets and issued regularly on the basis of the scheme drawn up when the pledges are signed. Funds are therefore perfectly predictable and stable and can be used directly for projects in the health sector. Donors involved in this initiative have pledged close to €4 billion over 20 years to fund far-reaching immunization programs. The funds are managed by GAVI (Global Alliance for Vaccines and Immunization) which allocates them to immunization projects; GAVI verifies the reliability of these programs.
— AMC (Advanced Market Commitments) - an innovative solution aimed at addressing failures in the global drug markets in the world’s poorest countries. Due to a lack of solvent and secure demand the pharmaceutical companies have, until now, focused their efforts on researching diseases that affect the richest countries. The Advanced Market Commitment pilot project was introduced for the pneumococcal vaccine in order to correct failures in the drug market. This mechanism involves establishing a partnership with the pharmaceutical companies in order to ensure that research is being carried out on diseases affecting the most underprivileged groups. Unlike mechanisms such as the IFFIm and the UNITAID central purchasing facility which use their funds to purchase existing drugs, Advanced Market Commitments finance research for drugs that are being developed .AMCs are thus an essential complement to the IFFIm and UNITAID mechanisms.
Other initiatives are also under way:
— France champions the creation of an International Solidarity Levy, a 0.005% tax on financial transactions to finance development, whether it be the improvement of food security, education, health, or the fight against climate change. Foreign Minister Bernard Kouchner presented this initiative to the UN Secretary-General in New York on December 7, 2009. He underscored the major importance of innovative financing along with public development aid and the support for the International Solidarity Levy from Leading Group members. The “Working Group on international financial transactions” brings together 12 countries including France within the Leading Group on Innovative Financing and promotes this initiative (see above).
— The “Debt2Health” mechanism offers a partnership whereby the creditor country foregoes repayment of a portion of its claims in exchange for the beneficiary country’s reinvestment of a counterpart amount in the Global Fund to Fight AIDS, Tuberculosis and Malaria, for efforts in that country. In its pilot phase, $125 to $250 million should be available through that mechanism.
—The establishment of Cap & Trade. The EU is thinking to create a system whereby countries set a cap on greenhouse gas emissions and create an emissions market. These programs are aimed at reducing global emissions while allowing high-performance countries (those with the lowest emissions levels) to generate additional income through the improvement of other standards, such as environmental protection or health care. Revenues could also be allocated to projects in development countries.
In February 2008, UNITAID chairman and former French foreign minister Philippe Douste-Blazy was appointed Under-Secretary-General and Special Advisor to the UN Secretary-General in charge of Innovative Financing for Development. He heads I-8/LIFE, a think tank and action group under the auspices of the UN Secretary-General. This group drafted a report in December 2009 that presents some of the initiatives described above, as well as others.
In the specific area of health, the High Level Taskforce on Innovative International Financing for Health Systems was established in September 2008 in New York, at the behest of the United Kingdom, to raise additional funds to achieve the Millennium Development Goals, notably in the maternal and newborn health. Working closely with the International Health Partnership and Related Initiatives (IHP+) launched in September 2007, the taskforce headed by Prime Minister Gordon Brown and World Bank President Robert Zoellick includes such high-level figures as Foreign Minister Bernard Kouchner and Philippe Douste-Blazy, Special Adviser to the United Nations Secretary General in charge of Innovative Financing for Development.
(September 2010)
3. French statements
3 June 2010 - Informal event on innovative sources of development finance - Statement by Mr. Cyrille Pierre, Deputy Director for Global Economic Affairs and Development Strategy, at the French Ministry of Foreign Affairs
4. Reference documents
17 May 2010 - Informal event on innovative sources of development finance - UN Concept Note
28-29 January 2010 - Declaration of Santiago of the Leading Group on innovative financing for development
5. Useful links
Consult our file on financing for development
Consult our file on Millennium Development Goals
Consult the Leading Group on innovative financing website
Consult the file of the French Ministry of Foreign and European Affairs on innovative financing
