Box 4.1 The impact of different CO2 policy scenarios on the mobilization of climate finance 140 Box 4.2 A coherent international financial architecture for more and better capital flows to low-income countries 142 Box 4.3 Modeling the interaction between finance and policy 145 Box 5.1 The importance of governance and effective state-business relations 168. Public international finance increased by just under 0.1 trillion USD (and . the total is now less than 1.5% of all available resources).
The post-2015 policy context 47
Indeed, the ambitious scope of the post-2015 development agenda will present unprecedented challenges at national and international levels. 1 According to UN General Assembly resolution 68/309, "the proposal of the open-ended working group will be the main basis for the integration of sustainable development goals into the post-2015 development agenda, recognizing that other contributions will also be taken into account".
The post-2015 policy context
Sustainable Development Goals (SDGs) and targets; 1 Means of Implementation (MOI) and Global Partnership 2; and Follow-up and Review. SG establishes high-level panel of eminent persons on Post-2015 Development Agenda (HLP).
The policy challenges
The report focuses specifically on the evidence on the links between finance and policy and aims to encourage joint discussion on them. Third, to date there is insufficient evidence for the link between finance and politics to contribute to a transformative post-2015 development agenda.
A review of the role of national and international policy in mobilizing and making more effective use of finance in six areas (ie local governance, infrastructure, human capital, biodiversity, green energy technology and trade). Two types of modeling studies were commissioned to explore some of the connections between economics and policies for the enablers (e.g. infrastructure) in greater depth: modeling on Bangladesh (Kinnunen, 2015), Moldova (Levin, 2015a) and Tanzania (Levin, 2015b). and other modeling exercises (see Table 1.1).
2015) Synthesis of the country illustrations. to the European Report on Development 2015 Synthesizes the findings of the CBs. The role of infrastructure, finance and foreign direct investment. in boosting Moldova's growth - MAMS-based analysis Models infrastructure investments. Financial sector performance and FDI shocks in Moldova.
An overview of all ordered contributions can be found in table 1.1. Finance and policies for sustainable development transformation factors in individual countries. It focuses on transitioning tax systems with income growth and opportunities for the post-2015 agenda to promote DRM.
Financial instruments for agricultural development and transformation relevant to low-income and lower-middle-income countries. The review highlights the importance of moving from a focus on gaps in financing needs to understanding the role of finance in a transformative agenda, and to the role of policies to mobilize finance and make it more effective.
The scale of finance required: 71 comparing MDG and post-2015 contexts
This chapter reviews the lessons learned from financing needs studies that were intended to support the implementation of the MDGs. The important feature of the two-gap model is that ODA (or concessional financing more broadly) is seen as the way to fill the gap.
Reviewing the basis of the studies on MDG finance needs
- The intellectual underpinning
- Methodological steps needed in finance needs studies
Reddy and Heuty (2006) point to the impact of the AIDS epidemic on health targets, which severely affected estimates of financing needs. Three MAMS modeling studies were commissioned for this report to consider the role of finance and policy in the context of the MDGs.
The scale of finance required
- Finance needs to meet objectives in the MDG context
- Finance needs to meet economic and environmental objectives in the post-2015
- The MDG achievement: mobilising aid and influencing public expenditure
- Three implications for the post-2015 discussions on finance for development
The figures presented by Zedillo (2001) therefore represent only 'the order of magnitude' of the additional financing required to achieve the MDGs (Reddy and Heuty, 2006). While these models have the major advantage of trying to 'think beyond aid', the disadvantages are that they generally do not sufficiently take into account the role of private financing options or policies.
Private development assistance (PDA) includes financial support from private agencies such as NGOs, foundations and corporations; but due to limitations in official reporting (especially with regard to geographic coverage) it is difficult to assess the full extent of PDA and to discern what additional resources are mobilized than channeling ODA. It is important to understand such characteristics in order to appreciate the role that each source can play in helping countries to enable sustainable development, and how they can be best mobilized and managed for the most efficient use of finance. to make in the post-2015 context.
Classifying flows of finance
- Overall finance trends
Domestic public sources of financing have been the most important and have grown rapidly over the period. For the most part, the growth of financing sources obtained by developing countries was only moderately affected by the global financial crisis and recovered quickly.
Historical trends in sources of finance
- Finance trends by country income group
- Trends by category of finance
It illustrates that public finance dominates private finance in developing countries at almost all income levels. It is also worth noting that across all developing countries over the period 2002–2011, average PR/GDP levels for resource-rich (RR) countries are generally slightly higher than those mobilized by non-resource-rich countries. resources (NRR) (see Figure 3.12).
Financing trends and challenges beyond 2015
Future trends and proposals for mobilising finance
- Future trends in financing
- Proposals and instruments for scaling up development finance
Funding of banks and pension funds in developing countries is expected to increase further. Inflows to sub-Saharan Africa as a share of total inflows to developing countries (right axis).
Conclusion
International public finances have increased, but are rapidly declining in relative importance and are sometimes allocated to richer developing countries. This will require a reform of national finances, international public finances (especially concessional aid) and the international system.
Making finance more effective 143
Conclusions and implications 156 for the global system
- Mobilising domestic public finance
It is structured as follows: Section 4.1 examines the role of policies that influence the mobilization of finance, and Section 4.2 examines the role of policies that shape their effective use. Achieving short-term changes in the tax-to-GDP ratio is not easy – but it is not impossible either.
Mobilising finance
- Mobilising international public finance
- Mobilising domestic private finance
- Mobilising international private finance
- Effective use of domestic public finance
The determinants of ODA and OOF include poverty and income per capita, vulnerability, policy factors (objectives), cultural factors (e.g. the relationship between countries and the former colonial powers) and other characteristics of specific donors and recipients. Box 4.1 | The impact of different CO2 policy scenarios on mobilizing climate finance. 2009) find that the inflow of remittances is countercyclical and acts as a shock absorber.
Making finance more effective
- Effective use of international public finance
- Effective use of domestic private finance
- Effective use of international private finance
Improved governance, combined with increased official development assistance, is projected to further reduce poverty rates in LIC by 11 percentage points – the largest decline among the scenarios. When an LIC acquires MIC status, the financial sector tends to expand in depth and complexity.
Linkages among flows
A range of international policies affect international private finance (e.g. RTAs, global financial rules, global environmental policies) and to some extent domestic public finance. While financing is often used as a second best solution to address the negative consequences of international shocks on developing countries (e.g. through shock funds, aid for trade and climate finance), reforms of global rules are often more effective approaches and can also reduce the need for additional financing.
Conclusions and implications for the global system
The overviews presented in sections 4.1 and 4.2 show that the policy context is crucial for mobilizing and making more effective use of financing flows. Some policies are designed to avert crises and volatility and promote stable financing (e.g. macroprudential policy; Basel III), others are designed to fill gaps (e.g. shock facilities; aid).
An integrated conceptual framework 162 for the role of finance and policies
This chapter presents the Report's conceptual framework for examining the role of finance and policy in enabling this agenda. This chapter introduces the report's framework for examining the role of finance and policy in supporting such a transformative agenda.
An integrated conceptual framework for the role of finance and policies in enabling a transformative post-2015 development agenda
- Local Governance
It describes the role of financial flows (domestic and international, public and private, see Chapter 3) in promoting sustainable development. One of the key messages is that the role of finance in promoting sustainable development must be seen in the policy context.
A focus on selected enablers of sustainable development
- Infrastructure
- Human capital
Although the framework introduced in this section may be considered flawed, it introduces another level of reality—the interaction between policies and finance for enablers—that is crucial for considering the role of finance for sustainable development. Measuring human capital by the percentage of the working-age population with a secondary education, Mankiw et al. 1992) found that it increased production in about 100 developing countries.
ECUADOR COUNTRY ILLUSTRATION
EXTREME POvERTYCHILD LABOUR
INEqUALITY
FINANCING DEvELOPMENT
DRIvERS OF DEvELOPMENT
Biodiversity
The concept of 'natural capital' (also called environmental or ecological capital) emerged in the 1970s in the context of the limits to growth discourse, with its focus on sustainability (Hinterberger et al., 1997). The poorest are most dependent on natural capital for their livelihoods and therefore have disproportionate effects of resource degradation.
Green Energy Technology
The depletion of natural capital is only sustainable if the proceeds from the exploitation of natural resources are reinvested. Existence value refers to the non-use value derived from the fact that the asset exists (for example, the value that people simply place on knowing that tropical rainfall forests exist).
Trade
Other factors such as the depth of domestic credit markets, educational variables, the degree of protection provided for intellectual property rights (IPRs), the ability to mobilize government resources, and the quality of complementary academic institutions also appear to be important in explaining of a country. technological readiness (Lederman and Maloney, 2003). The difference in the use of green energy technology is responsible for the disparity in the share of renewable energy between the two countries.
8000 NEW JOBS
PER CAPITA GDP
AGRICULTURE
ICT AuThorITy
MAURITIUS COUNTRY ILLUSTRATION
- Conclusions
- The role of finance and policies 188 for local governance
- The role of finance and policies 201 in infrastructure development
- The role of finance and policies 221 in the development of human capital
- The role of finance and policies 242 for biodiversity conservation
- The role of finance and policies 259 in the diffusion of green energy technology
- Local financial resources: municipal finance for infrastructure and services
- The role of finance and policies for local governance
- The role of policies and finance for local governance
At the same time, local authorities have comparative advantages (Brugmann, 1994), such as the use of participatory planning or the potential to utilize additional resources for local development (Romeo, 2012). The use of financial intermediaries can increase the capacity of local authorities to access debt markets.
ENABLER: LOCAL GOVERNANCE
The record of local government involvement in service delivery is mixed, particularly in low-income countries. It is essential to ensure that internal policies on the roles of local government are fully worked out and to ensure that local governments are properly equipped to fulfill their roles.
LICs1 1
Central government funding (including elements of international and domestic public finance) is the main source of funding, but there are also positive examples of local governments raising revenue locally provided adequate regulatory frameworks and public finance management systems are in place.
MICs
The role of finance and policies in infrastructure development
- Conclusions and implications of finance for local government
- Financing infrastructure
- Links between finance and policies for infrastructure development
One of the most recent and interesting attempts at cooperation among emerging economies is the establishment of the India-Brazil-South Africa (IBSA) Dialogue Forum. According to Collier and Mayer (2014), “Africa's inability to finance its infrastructure needs is therefore not a capacity constraint.
INCREASED INVESTMENT IN INFRASTRUCTURE
IPFFIIFC
BIFFLIDCOL
ENABLER: INFRASTRUCTURE
Conclusions and implications regarding investment in infrastructure
For example, the Jamuna Multipurpose Bridge connects the eastern and western parts of the country. Long-term financing in developing countries, especially for infrastructure, requires both the mobilization of domestic resources and the active support of DFIs and MDBs in deploying appropriate financial instruments.
The role of finance and policies in the development of human capital
- Financing human capital
- The role of policies and finance for human capital development
- Conclusions and implications for investment in human capital
Although the policy focus on access to primary education is very important, “the mere fact of enrollment in itself does not help children or their families rise out of poverty” (CPAN, 2014b). On the other hand, there is a solid potential for South-South policy learning, given the similarities in implementation conditions and constraints and the fact that some major proponents of SSC, such as Brazil, China and India, have direct experience in implement large-scale social protection schemes. , some with considerable success (e.g. Brazil's Bolsa Familia or China's Minimum Living Standard Scheme; Bachelet, 2011).
EDUCATION
FLOWS
FINANCIAL
ENABLER: HUMAN CAPITAL
Financing biodiversity conservation
Because current market prices are distorted, they are a poor mechanism for mobilizing and channeling biodiversity finance as they do not accurately reflect the value of the public benefits derived from biodiversity, or the social opportunity costs of degradation and loss. biodiversity (OECD, 2013). The total costs of biodiversity loss are difficult to estimate, but estimates range between $2 tr and.
The role of finance and policies for biodiversity conservation
- The role of policies and finance for biodiversity
Environmental funds (EF) are among the most popular mechanisms for financing the conservation of biodiversity and ecosystem services (Xiang et al., 2007:2). Only very popular PA can sustain sustainable fee income (eg Serengeti National Park in Tanzania) (Mansourian and Dudley, 2008).
FINANCIAL FLOWS
Various national and international financial instruments are being used to finance biodiversity conservation. National policies to mobilize financial regulation / property rights around financial instruments (PES, user fees, private storage concessions) financial sector reform.
DESPITE IMPORTANT START-UP INvESTMENTS, THE CONCESSION
SUSTAINABLE
ENABLER: BIODIVERSITY
Conclusions and implications of environmental finance
It focuses on green energy technology transfer, including the role of innovation, finance and policy. Green energy technologies exhibit aspects of public goods (such as reduced GHG emissions) that the market cannot adequately provide.
The role of finance and policies in the diffusion of green energy technology
- Financing green energy technology
- The role of policies and finance for green energy technology
The provision of DFI and RDB financing for renewable energy and the spread of green energy technologies can complement domestic and international private sources. Field 6.18 | The role of finance and policies in the expansion of renewable energy technology in Kenya and Tanzania.
26 MW Geothermal
GOVERNMENTS
DONORS
PRIVATE SECTOR
Conclusions and implications
The distinctive features of GTT require both policy initiatives and interventions that facilitate the transfer and deployment of green energy technologies and the provision of financing schemes and opportunities. Sustainability management requires a proactive approach to environmental and social issues and impacts on the environment.
The role of finance and policies for trade
- Financing trade: different sources and effects
- Links between finance
As with infrastructure finance, DFIs and MDBs can play a catalytic role in trade finance and financial sector development. Further involving them in the provision of trade finance and risk mitigation instruments appears to be an effective strategy for private sector development and trade promotion that helps overcome constraints in credit provision of underdeveloped domestic financial markets.
COUNTRIES CAN USE A RANGE OF POLICIES TO MOBILISE FINANCE
ENABLER: TRADE
- Conclusions and implications regarding investment in trade
- Composition of finance flows: 298 What has been learned?
- The interaction between policies 302 and finance: What has been learned?
- Steps towards a Global Partnership 310 for the post-2015 development agenda
- draws three major conclusions from a review of the studies on MDG finance needs
- Setting the scene
- examines the role of policies in mobilising financial flows and in making
- The finance mix differs by level of income
- The finance mix varies by enabler
- Composition of finance flows
- demonstrates that policies matter in financing for development. Although there is
- The interaction between policies and finance: What has been learned?
This creates a virtuous circle between the enablers and finance - examples include mobile phone technology for mobile banking and human capital for FDI. Second, designing standards that encourage adherence to the principles of sustainable development finance (eg infrastructure procurement standards that require sustainable development impact assessments) can unlock triple-win funding.
POLICY MATTERS
Finance cannot be treated independently from policy
Steps towards a Global Partnership for the post-2015 development agenda
- Financing for development as an on-going process
- Keeping core principles in mind
COUNTRY GROUPINGS AND REGIONAL
AUTONOMOUS STATE BODIES (EXPORT CREDIT,
EXPORT PROMOTION AGENCIES ETC.)
STAKEHOLDERS (ACADEMIC INSTITUTIONS, THINK
AUTHORITIES MULTILATERAL
INSTITUTIONS (WORLD BANK, IMF,
RDBS, DFIS, ETC.)
BUSINESS ORGANISATIONS
NON-FINANCIAL FIRMS
NATIONAL GOVERNMENTS
DATA
TAR GE TS
THE ROUTE TO A GLOBAL PARTNERSHIP
Introduce a monitoring and accountability framework
However, in terms of finance and policy in the Monterrey Consensus, only international public finance was in fact assigned a monitorable target. Given the fundamental role of the financial and policy framework in the post-2015 development agenda, it will be important to ensure that this monitoring and accountability process is part of a broader system that monitors progress against the goals and targets and their means of implementation.
Involving multiple actors
A major challenge for a new financial and policy framework is to set targets and other measures that can boost financing and other aspects of financing and implementation in the coming years. In addition to the existing system, other data systems could be established covering different aspects of finance and MOI (e.g. on disclosure for private entities, including banks).
Policy matters
Serious implementation of debt sustainability principles, aid effectiveness (including donor coordination) and agreement on a sovereign debt restructuring mechanism are all essential measures to improve the use of international public finance. Providers should therefore focus not only on the immediate impact of their support, but also on the long-term incentives for a transformative development agenda.
Concluding remarks
- The pattern of finance for development evolves at different levels of income
- Accountability and participation
Background paper for the European Development Report 2015: Combining finance and policy to deliver a transformative post-2015 development agenda (2015). Background paper for the European Development Report 2015: Combining finance and policy to deliver a transformative post-2015 development agenda (2015).
Local Governance
UNECA (2011) Economic Report on Africa 2011, Governing development in Africa – the role of the state in economic transformation. Tools and Methods Series, Reference Document No. 2. Available at:
Infrastructure
Background paper for the European Development Report 2015: Bringing finance and policy together to deliver a transformative development agenda post-2015. The role of infrastructure finance and foreign direct investment in driving Moldova's growth - a MAMS-based analysis. ERD meeting: Financing the transformative post-2015 agenda – how infrastructure financing fits. 2012) Accessing Local Markets for Infrastructure: Lessons for Africa.
Human Capital
Bringing finance and policy together to implement a transformative post-2015 development agenda Sub-national revenue mobilization in Peru. Background paper for the European Development Report 2015: Bringing finance and policy together to deliver a transformative post-2015 development agenda Who pays and who benefits for health care.
Biodiversity
Available at: Appendix Part Two: Actions Taken by the Conference of the Parties at its Thirteenth Session. REPP (2012) “Development of Small-Scale Renewable Energy Projects in Sub-Saharan Africa: Market Testing for the Renewable Energy Performance Platform (REPP)”. Background paper for the European Development Report 2015: Combining finance and policies to implement a transformative post-2015 development agenda Do Aid-for-Trade Export Performance. Background paper for the European Development Report 2015: Combining finance and policies to implement a transformative post-2015 development agenda. Compare Development Finance Institutions Literature Review. We first examine in Figure 1 the variation in tax revenues across countries by identifying for each group the countries with the highest and lowest levels of this source of finance in 2011, as well as the group average and data for selected countries with high poverty. Source: PR/GDP from IMF FAD database; Note: Averages are weighted; selected countries have the highest and lowest level of PR/GDP in each group, and are also selected countries with a focus on poverty.Green technology
Trade
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