Ad Hoc Expert Group Meeting Rethinking the Role of National Development Banks New York, 12 December

1
Ad Hoc Expert Group MeetingRethinking the Role
of National Development Banks(New York, 1-2
December 2005)

• Overview Multi-stakeholder consultations on
  financing for development, 2004-2005
• Alexander Trepelkov, Chief, Multi-stakeholder
  Engagement and Outreach Branch,
• Financing for Development Office, UN-DESA

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Mandate

• In its resolution 58/230 of 23 December 2003,
  the General Assembly requested the Financing for
  Development (FfD) Office
• to organize workshops and multi-stakeholder
  consultations to examine issues related to the
  mobilization of resources for financing
  development and poverty eradication and
• to convene activities involving various
  stakeholders to promote best practices and
  exchange information on the implementation of the
  commitments made and agreements reached at the
  International Conference on Financing for
  Development.
• In response, the FfD Office, in cooperation with
  major institutional and non-institutional
  stakeholders in the follow-up process to the
  Monterrey Conference, launched a series of
  multi-stakeholder consultations, including
  experts from the official and private sectors, as
  well as academia and civil society, to examine
  selected issues on which informal and
  expert-level discussions by multiple stakeholders
  might facilitate policy debates in international
  forums.

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Process

• The 2004-2005 consultation process comprised a
  total of 21 meetings.
• The Financing for Development Office organized
  consultations on
• (i) building inclusive financial sectors for
  development and
• (ii) sovereign debt for sustained development.
• The World Economic Forum conducted another set of
  consultations on
• (iii) understanding how public-private
  partnerships can improve the reach and
  effectiveness of development assistance and
• (iv) improving the climate for private
  investment through leveraging multilateral
  development banks and aid agencies to catalyze
  private investment and through bringing financial
  governance capacity building to scale.
• The New Rules for Global Finance Coalition
  organized meetings on
• (v) selected issues related to enhancing the
  coherence and consistency of the international
  financial, monetary and trading systems in
  support of development.

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Outcome

• Report of the Secretary-General, entitled
  Multi-stakeholder consultations on financing for
  development, which was issued as an addendum to
  the annual report on the Follow-up to and
  implementation of the outcome of the
  International Conference on Financing for
  Development (A/60/289/Add.1), outlined the basic
  modalities, main findings and substantive
  outcomes of those consultations.
• Additional information is available on the
  Financing for Development website
  www.un.org/esa/ffd.

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Building inclusive financial sectors for
development

• In the context of the International Year of
  Microcredit, 2005, UN-DESA and UNCDF undertook to
  produce a Blue Book on Building inclusive
  financial sectors for development to serve as a
  reference point for national multi-stakeholder
  discussions in developing countries to help
  governments shape strategies towards inclusive
  financial sectors. That volume is in an advanced
  state of preparation. It was launched at the
  United Nations International Forum on Building
  Inclusive Financial Sectors (New York, 7-9
  November 2005).
• The Blue Book seeks to identify the key
  constraints to financial inclusion focusing on
  impediments at the level of the customer, the
  retail financial institutions, the financial
  markets, the policy and legal environment, and
  the regulatory and supervisory environment. In
  each case, the Book points to areas in which
  strategic policy choices are likely to make the
  biggest difference to the future development of
  inclusive financial sectors. Finally, the Book
  offers a series of strategic options.
• The Blue Book is not a Blue Print. The
  relevant stakeholders in each country should
  engage in their own consultative process to
  identify and address country-specific issues. It
  is most important to increase understanding of
  the key options facing countries, rather than
  offering a single solution. Domestic
  stakeholders may develop their own
  country-specific blue books consistent with
  their national development strategies.

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Sovereign debt for sustained development

• The FfD Office, in consultation with major
  stakeholders (UNCTAD, IMF and the World Bank),
  prepared an issues paper Strategic issues in
  managing sovereign debt for sustained
  development focusing on three main areas
• (i) how to make the concept of debt
  sustainability operational
• (ii) how to manage sovereign debt for policy
  coherence and
• (iii) practical ways to contain risk and reduce
  uncertainty.
• There was a convergence of views across
  stakeholder groups on two broad points
• (i) the absence of agreement on the concept of
  debt sustainability and
• (ii) the need for an improved mechanism to
  achieve cooperative debt workouts from crises.
• In follow-up, the FfD Office is cooperating with
  UNDP to assess the relationship between debt
  sustainability and the achievement of MDGs in
  HIPCs and other critically indebted countries,
  with the objective of providing an operational
  definition of development-oriented debt
  sustainability.

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Public-private partnerships to improve the reach
and effectiveness of development assistance

• The World Economic Forum examined the status and
  promise of public-private partnerships (PPPs) in
  three areas basic education, health and water
  and sanitation.
• The general findings of the consultations were
  threefold.
• First, participants stressed that PPPs had a
  significant role to play in achieving the MDGs.
  In particular, there was increasing recognition
  that development challenges require new
  approaches and partnerships that draw on the
  expertise of the private sector.
• Second, the deliberations pointed to evidence of
  increasing amounts of private resources being
  directed to development-oriented PPPs.
• Third, many participants called on the official
  and private sectors to better integrate PPPs into
  the structuring and delivery of aid programmes,
  and to work towards scaling-up their use and
  strengthen their implementation.
• The cross-cutting and sector-specific
  recommendations have been elaborated by the World
  Economic Forum in its report Building on the
  Monterrey Consensus The Growing Role of
  Public-Private Partnerships in Mobilizing
  Resources for Development.

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Improving the climate for private investment

• The World Economic Forum also explored ways of
  improving the climate for private investment by
  leveraging multilateral development banks and aid
  agencies to catalyse private investment and
  bringing financial governance capacity building
  to scale.
• While global capital markets could help meet the
  huge financing needs of developing countries for
  infrastructure, they are unlikely to provide the
  necessary finance without more targeted official
  sector support to cover unacceptable risks and
  uncertainties. There is considerable unused
  capacity in the multilateral development banks
  that could fund more official development finance
  without an increase in their capital.
• Recommendations were made on how to unlock this
  trapped capital in both private and public
  institutions, including the following points
• (i) strengthen the risk mitigation products
  offered by official sector agencies
• (ii) provide financial and technical assistance
  to project development capacities
• (iii) improve financial governance, including
  the quality of legal and regulatory systems,
  transparency, information, accounting standards,
  and performance standards across a range of
  private and public institutions and
• (iv) implement institutional changes within
  development agencies.

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Systemic issues

• The New Rules for Global Finance Coalition
  considered selected systemic issues from the
  Monterrey Consensus focusing on the structural
  features of the international monetary, financial
  and trading systems, the potential
  vulnerabilities they posed for developing
  countries, and the institutional design of the
  international financial architecture. The
  discussions generated many concrete proposals in
  the following areas
• As for financial crisis prevention, participants
  proposed mechanisms to make financial systems
  more resilient to the fluctuations of the
  financial cycle, including counter-cyclical
  prudential regulation, capital controls,
  strengthened local currency markets, and
  market-based instruments to hedge against
  commodity price fluctuations.
• With regard to crisis resolution, the
  consultations explored possible modalities of an
  efficient and equitable debt workout mechanism.
  Speakers also highlighted the fact that in a
  crisis situation affected countries needed quick
  and extensive funding in order to facilitate the
  negotiation of a longer-term solution. Another
  concern was how low-income countries could
  adequately protect themselves against external
  shocks.
• The debate on how to secure viable sources of
  domestic finance focused on tackling capital
  flight, improving international tax cooperation
  and finding an appropriate policy mix for
  supporting the productive economy.
• Lastly, the dialogues addressed the issue of
  enhancing the voice and participation of
  developing countries in economic policy-making
  and standard-setting bodies.

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Next steps

• The 2004-2005 series of multi-stakeholder
  consultations on financing for development have
  generated a number of interesting ideas and
  promising proposals. A possible next step would
  be to continue to explore the existing topical
  areas and viable recommendations, with a view to
  effecting their implementation.
• In addition, a new series of consultations, to be
  initiated in 2006-2007, might be merited by the
  many other policy areas covered by the Monterrey
  Consensus. The themes of these consultations may
  include
• (i) improving the regulation of financial
  sectors
• (ii) rethinking the role of national development
  banks and
• (iii) securing the financing of basic services,
  in particular in the water, sanitation and energy
  sectors.
• The General Assembly, at its current session, may
  wish to provide further guidance in this regard.