Outsourcing Development?

Launching of the SW Report 2014.

The Social Watch Report on “Means and Ends” was launched last July 10 at the UN headquarters in NY during a side-event of the Development Cooperation Forum. The event allowed to present some key findings of the report and addressed strategic issues of the current development cooperation debate, such as the “leveraging” of ODA and it's redefinition, corporate access to ODA funds and the global financial architecture.

Introducing the debate, Barbara Adams from Social Watch and the Global Policy Forum, said that current conversations about “partnerships” are changing the landscape of development cooperation into one of multiple non transparent and unaccountable loose associations with corporations as main actors.

Jeroen Kwakkenbos, researcher from Eurodad, explained that while ODA is the most scrutinized and transparent financial flow, the idea that these characteristics could be transferred to other flows is “naive”. The so-called “leveraging” of ODA, using public funds to mobilize other resources for development purposes has no empirical base.

“Developed countries are simultaneously encouraging their partners to let portfolio investors come in and buy your securities and at the same time they are saying that you can't have capital controls” he explained. So that when these volatile funds rush out of the country “you're pretty much left with the bill and maybe you will get some debt relief at the end but for the most part your children and the children of your children will still be paying”.

The question -he said- is not how to get the institutional investors to invest in infrastructure development in poor countries but the question is how to ensure that countries have the control over the finances that affect their development goals. This is not just for developing countries but also for developed countries where poverty and inequalities are growing problems. There is eleven percent malnutrition in the United States, a rich country where there is no lack of financial resources.

Kwakkenbos quoted the UN secretary general's report on development cooperation as “an accurate description of the real challenges: accountability, development impact, additionality”.

Roberto Bissio, from the Social Watch secretariat, explained the findings of over 50 national coalitions included in the report and the dynamics between the “ends” (the agreed goals) and the means to implement them, which is at the core of all development cooperation debates. In the current conversations, the “ends” are being lowered in such a way that no additional cooperation efforts would be required. The limited poverty definition of $1.25 a day, for example, if transformed into the main goal for 2030 would imply that no transformational change is needed, since current projections indicate that this reduction is what is going to happen anyhow if present trends continue.

In 2004, at the eleventh session of UNCTAD in Sao Paulo, secretary-general Rubens Ricupero warned developing countries about liberalizing capital accounts comparing such a move with joining the mafia. If the expected benefits do not materialize after a while, you cannot just send a resignation letter!

Many countries, too many countries, tried financial liberalization and now they are realizing it is not bringing the desires benefits, but they can't get out.

What is needed is a “witness protection program” for countries that try to get out of extreme liberalization of finances and investments, protected through a network of bilateral investment treaties that penalize any changes in the rules that investors don't like. Such a program can only come from the UN, but there is very little help currently in the UN development system for countries that want to recover their authority over their own development policies.

Next week in Fortaleza, Brazil, the BRICS will be launching their own development bank and a monetary fund, with a capital of one hundred billion dollars each. And this happens at a moment when the IMF has depleted its funds with the last loan to Ukraine. Ninety percent of the IMF funds are currently deployed in Europe and the US Congress has vetoed an increase in Special Drawing Rights (the IMF “currency”) as well as an increase in the voting power of developing countries, even when both measures had been agreed by the G20 in 2010 and even when the veto power of the US would not be challenged.

“We risk entering a new cold war with the world divided in two more or less equally powerful blocs”, argued Bissio, “or we may enter a new era of real and genuine collaboration. This is the real development cooperation agenda of the future”.

Jens Martens, from Global Policy Forum argued that “multistakeholder Partnerships are the flavor of the day”. They build on the notion that governments will not be able to solve global problems by themselves. Business is seen as the main driver of development, as the “principal engine” of growth and job creation – leading up to the recommendation by the Global Compact to create “business led” global issue platforms aligned to specific sustainability challenges.”

Multistakeholder partnerships in fact bring a number of risks and side effects, said Martens. Growing influence of the business sector in the political discourse and agenda-setting is one of those risks. Critics fear that partnership initiatives allow transnational corporations and their interest groups growing influence over agenda setting and political decision-making by governments.

Additionally, choosing the wrong partner might damage the reputation of the United Nations. It is particularly problematic for the UN to collaborate with partners whose activities contravene the UN Charter and UN norms and standards. This is especially true of partnerships with those transnational corporations accused of violating environmental, social or human rights standards.

Project-related public private partnerships between international organizations and individual companies in particular, are generally exclusive. These partnerships can distort competition, because they provide the corporations involved with an image advantage, and also support those involved in opening up markets and help them gain access to governments. The selection of partners is also problematic in many multistakeholder initiatives. Often, the initiator of a partnerships rather than respective stakeholder groups nominates representatives to the partnership bodies.

The provision of public goods becomes increasingly privatized, it will become dependent on voluntary and ultimately unpredictable channels of financing through benevolent individuals or private philanthropic foundations.

Instead of considering partnership initiatives as complementary to inter-governmental processes, they are often promoted as replacements of intergovernmental agreements.

In order to avoid the “corporate capture” of the UN and undue influence of business actors on the Post-2015 Agenda, the UN and member states should build an intergovernmental framework for partnership accountability in the Post-2015 Agenda.

The High-Level Political Forum (HLPF) and the Development Cooperation Forum (DCF) could become the hub for the monitoring and oversight of partnerships in the post-2015 development agenda.

Many governments have supported the UN’s outreach to the corporate sector while others have remained silent, even though they are uncomfortable with recent developments. It is time for member states to speak out on the role they envision for the business sector in the Post-2015 agenda and the UN system at large, and what risks current practices and attitudes may pose. The recent initiative spearheaded by Ecuador (and supported by several member states) in the Human Rights Council to advance a binding instrument to regulate transnational corporations may be signaling that the discourse is shifting towards a much stronger recognition of business responsibilities towards human rights.

See here the complete minutes of the event.