The Addis deal that will “turbo charge development”

UPDATED WITH INTERNATIONAL REACTIONS

The Financing for Development meeting ended last night in Addis Ababa with the UK Secretary of State for Development hailing it as “a historic international deal that takes us beyond aid.” Justine Greening went on to say, “It is the first ever agreement that allows us to harness private sector investment and developing countries’ domestic resources, including tax revenues, to turbo charge development. The significance of today’s unique agreement cannot be underestimated. This deal would have been unthinkable just a few years ago and is a major step towards getting the resource levels we need if we are to fast track economic growth in the developing world and eradicate extreme poverty.”

Maybe the lack of sleep and the jet lag had make Ms Greening, an accountant by training, uncharacteristically excitable or maybe it was just that she got the enthusiastic young press officer on the trip with her.

We haven’t seen the details yet. The agreement does look interesting. “Historic” and “beyond aid”? Probably not.

The advanced economies agreed to give 0.7 percent of GNI as overseas development assistance. Quite how much that means is covered in one of our posts last week. The short answer is, not the paper it is printed on. The donors also committed to about quarter of this aid going to the least developed countries. This matters because the percentage of aid going to the poorest countries has been declining. In fairness, there are fewer and fewer least developed countries (countries such as Ghana, India and Nigeria are now classified as middle income) and many of the LDCs don’t have the infrastructure to spend aid effectively (the Central African Republic, for example). This has led to an unseemly rush to push aid at the remaining stable LDCs such as Bangladesh, Ethiopia and Tanzania

The Gates Foundation committed about $760 million to nutrition and the UK kicked in about $180 million. This is great. It’s not clear why they needed to go to Addis to announce it.

As the One Campaign reports, the new Global Financing Facility will, “align funding for maternal and child health from public and private partners behind developing countries’ national plans, supported by contributions from US, Canada, Japan, Norway, Canada and the Bill & Melinda Gates Foundation.” Watch out for weasel words: “align funding” usually means not much new money and sure enough the new money seems to be a tiny $200 million.

There seem to have been decisions on limiting the activities of vulture funds and some more transparency in debt arrangements

The Addis Tax Declaration will strengthen the ability of developing countries to tax multinationals and others. The newly-giddy Ms Greening says, “the UK’s launch of the ground-breaking Addis Tax Initiative alongside the Netherlands, Germany, Ethiopia, Kenya and others …  now put[s] us firmly on the path towards ending aid dependency.” This might be more convincing had the UK not used every ounce of political muscle at its disposal to help Vodafone dodge $7 billion in apparently legitimate Indian taxes and were not the Netherlands home to many of Europe’s most creative tax avoidance schemes. Australia emerged as the best friend of the tax avoiders at the Addis meeting and was, pointedly, left out of Greening’s quote despite being, in its words, “a founding partner of the Addis tax initiative”.

There were fine words on the private sector being harnessed to help the poorest and on access to banking. It is all very worthwhile and much of it may really happen. But, a quick look at the World Economic Forum briefing paper might just bring you to the edge of despair. The endless meetings of academics,  officials and corporate social responsibility divisions is hinted at in this paragraph, “In September, in the Maputo Affirmation, the Alliance for Financial Inclusion will recognize SME lending as a core pillar of the Maya Declaration, and will provide a toolkit to encourage institutional commitments and goals for SME finance.” Surely the point of the private sector is to be nimble, responsive and creative — not to meet for an endless cycle of summits, declarations and accords.

By the end of the week, it was notable that few international news outlets had bothered to report the Addis outcome at all. Even the Guardian sent only a freelancer (albeit a very good one) who contributed a fairly gloomy piece, that reported “Addis was at times as tortured as the winding road that led there.” Here’s how the ONE campaign put it, “As ONE members around the world well know, we’ve been building up to this week for a very long time. It might not have pricked the consciousness of the wider public…” While the Guardian puts the negotiations on taxes at the centre of its reporting, ONE says only, “not enough was done on crucial issues like domestic resource mobilisation, infrastructure financing and transparent country by country reporting of business activity and beneficial ownership of companies.” This may be because Bono, the founder of ONE, is the focus of continued controversy about his own tax avoidance practices. That may explain the uncharacteristic absence of billionaires at the event too

Probably the definitive evaluation comes from the New York Times. It thought the conference so uninteresting that it didn’t send anyone to cover it. It did run a brief report from The Thomson Reuters Foundation which noted that, “there were hardly any new pledges made, except for an additional $214 million in support for the World Bank-managed Global Financial Facility, which aims to strengthen healthcare systems to cut mother and child deaths.”