TUDCN Addis Ababa FFD3 update #4 (16 July 2015)

TUDCN reaction to the agreed Addis Ababa Action Agenda on Financing for Development

The FFD3 conference has come to an end. Trade Unions believe the Addis Ababa Action Agenda lacks ambition and commitment, making business worse than usual, showing a deficit in terms of social dialogue and with many open questions about its follow-up.

Read the outcome document of the Addis Ababa Action Agenda (AAAA).

Read the Trade Union reaction to the Addis Ababa Action Agenda (AAAA).

Read also the Civil Society Response to the Addis Ababa Action Agenda on Financing for Development.

Special Meeting in preparation for the 2016 Development Cooperation Forum

Wellington Chibebe, ITUC Deputy General Secretary, spoke at this special meeting, organised by the Office for ECOSOC Support and Coordination, Department of Economic and Social Affairs (DESA).

Chibebe voiced the need to agree on a coherent narrative about how, when and whether financing instruments, like blended finance and PPPs should be used. As a minimum blended finance mechanisms and PPPs should demonstratively aim at sustainable development, affordable infrastructure services, full transparency over financial risks, prevent unsustainable debt burdens and be conditional on feasibility and auditing criteria, he said.

Accountability is the red thread, from the private sector to governments and governments to social partners and communities. In particular the inclusion of trade unions at country level is crucial to grant accountability of business, and this is why social dialogue is so important.

He added that aid resources should primarily be used to reduce poverty and inequality and achieve development goals. The goal of any private sector engagement in development should be producing positive development outcomes and this should not be obscured by the drive to create and increase profit.

Chibebe outlined a number of criteria and recommendations which should be understood and integrated when talking about blending:

  • Develop and implement the necessary tools to maximise the development impact of aid flows. Aid is a scarce resource and donors need to be able to answer questions such as whether using aid to leverage investments in developing countries represent a more efficient and effective use of aid compared to, for example, directly supporting health and education with ODA.
  • Donors should ensure financial additionality by establishing indicators that assess financial needs as well as opportunity costs in relation to other development concerns, and by creating eligibility criteria that favours the domestic private sector and takes into account track records of the private sector actor in delivering development results.
  • Given the problems in measuring additionality, donors need to clarify intended development outcomes and ensure that public investments to the private sector translate to sustainable livelihoods, observance of labour rights, generation of quality employment, and improvement of social and environmental outcomes.
  • Agree on a global framework, modelled on the development effectiveness principles that can also be applied to all forms of support to the private sector. This should particularly include, alignment with the country’s development priorities and an inclusive approach to citizen engagement—and we highlight in particular the social dialogue. These principles must be consistent with democratic ownership and the use of country systems including in public procurement.
  • Special attention should be paid to reporting practices related to ´leveraging’ aid modalities and to the limitations of assessing blended finance once it leaves the government institution, taking in mind the actual risk of privatisation of public basic services.

Chibebe concluded by affirming that donors should commit to fully untying aid to ensure that aid resources can be used most effectively and efficiently and can target strategic partners in the private sector.

FFD3 roundtable 4: Ensuring policy coherence and an enabling environment at all levels for sustainable development (Trade)

The TUDCN delegation attended the FFD3 roundtable 4, around the issue of policy coherence and enabling environment in relation to trade. ITUC Policy Officer Georgios Altintzis spoke on behalf of CSOs in this high level discussion with, among others, Alicia Bárcena, Executive Secretary, United Nations Economic Commission for Latin America and the Caribbean, Vesna Pusić, First Deputy Prime Minister and Minister of Foreign and European Affairs, Croatia, Liliane Ploumen, Minister for Development Cooperation and International Trade, Netherlands, and Jaime Alfredo Miranda, Deputy Minister for Foreign Affairs, El Salvador.

Alicia Bárcena reminded that Latin America is the most unequal region in the world. She said a new generation of social policies is necessary, to move to a non-carbon economy, and promote decent jobs, since “decent jobs is the key to sustainable development”. She advocated for new social contracts that push for equality and said that “real partnership and CSR is when companies pay taxes”.

Bárcena also called for national planning to come back. These plans should be linked to national budgets, she added. That is because the political economy in developing countries of adjusting public expenditure has been taken by finance minister, with no plan behind, and no coordination with other areas.

Bárcena also mentioned the need to mobilise domestic resources, particularly when ODA is no longer an option. ODA counts for 10 billion USD compared to 160 billion USD of FDI. Tax evasion should also be addressed, which amounts to 60% in some countries in Latin America. In this region, illicit financial flows represent 150 billion USD, almost the same figure of FDI (160 billion USD).

The CEPAL chief said that FDI should promote value added and decent jobs. She also mentioned the constraint debt poses for mobilisation of national resources, while she advocated for debt restructuring.

Georgios Altintzis said trade can play an important role in the development of nations but benefiting from trade has never been automatic. History shows that, industrial policy has been used by developed countries to achieve the type of high value-added production that creates decent jobs and generates wealth.

For this reason, the need for policy space has never been more imperative, he added. In this regard, he noted that language on policy space was more ambitious in Doha, than it is in Addis Ababa.

Altintzis said that successful policies are driven by domestic capital. But, he added, as supply chains have become the norm, a successful development agenda needs to address the issues of value capturing, not only value addition or value creation.

Policies that help SMEs and their workers capture a fair share of the created wealth are required. He quoted empirical studies on domestic capital based development models that show that the extra income tends to be re-invested in the country, taxes are paid and a domestically-owned capital is built and that can finance development based on own capacity.

He pointed out at the increasing trend of feminization of precarious work and exploitation of workers, especially women, a move to privatize public services through trade agreements, and a major asymmetrical threat to policy space constituted by ISDS, with which corporations sue governments for policies that affect their investment. He noted that CSOs and trade unions stand united in opposing the ISDS. In this regard, he said the removal of a moderate clause calling for the review of ISDS from the Addis Agenda is not understandable.

Tessa Khan, Programme Officer, Asia Pacific Forum on Women, Law and Development (APWLD), also spoke on behalf of CSOs. She said that in their own development trajectories, developed countries relied on infant industry protection and state intervention to achieve the type of high value-added production that creates decent work and supports equitable and sustainable development. Developing countries are equally entitled to this degree of policy space, she added.

Ms Khan said that the purported benefits of global value chains for productive capacity and skill-building overlooks the fact that women workers participating in global value chains are concentrated in and have been confined to labour intensive, low-wage export industries. As a matter of fact, the assed, “firms operate on the basis of competitive advantage that depends on low pay, causalisation and informalisation of women workers”.

She insisted that the promotion of global value chains only happens in the context of policy frameworks that are consistent with support for SMEs and higher-value addition, and more importantly, that are coherent with the binding obligations of States under international human rights frameworks and ILO Conventions.

FFD3 roundtable 5: Global partnership and the three dimensions of sustainable development (Tax and tech-transfer)

The TUDCN delegation attended the FFD3 roundtable 5, around the issue of global partnership and the three dimensions of sustainable development in relation to tax and tech-transfer. ITUC Africa Senior Advisor, Joel Akhator Odigie, spoke on behalf of CSOs in this high level discussion with, among others, Mr. Jayant Sinha, Minister of State for Finance, India, Mr. Carlos Lopes, Executive Secretary, United Nations Economic Commission for Africa, and Mr. Dereje Alemayehu, Coordinator, Global Alliance on Tax Justice as discussant.

FFD3 roundtable 6: Ensuring policy coherence and an enabling environment at all levels for sustainable development (Systemic issues)

The TUDCN delegation attended the FFD3 roundtable 6, around the issue of ensuring policy coherence and an enabling environment at all levels in relation systemic issues. Rekson Silaban from the KSBSI trade union in Indonesia spoke on behalf of CSOs in this high level discussion with, among others, Mr. Wu Hongbo, Under-Secretary-General for Economic and Social Affairs, United Nations, and Conference Secretary-General, Mr. Joan Clos, Executive Director, UN-Habitat and Mr. Stefano Prato, Managing Director, Society for International Development.

Rekson Silaban said that reforming international financial institution is a must, considering that more and more people is questioning the effectiveness of current global financial institutes to tackle frequent economic crisis. The Bretton Woods institutions conditionalities often suggests countries to liberalise their markets, flexibilise labour market, cut social spending and lower labour cost. In his experience, Silaban said these measures have created more problems than solutions, taking workers away from decent work.

Silaban affirmed that decent work is an important source for development, since better jobs lead to rising consumption, increased savings and productivity. “With the current financial global setting, which lacks global policy coherence, we are entering a dangerous future”, Silaban pointed out.

Silaban expressed that the absence of global tax governance is one of the reasons many countries lose the opportunity to mobilise domestic financial resources. He quoted a recent report by the Indonesian, denouncing that thousands of multinational companies do not pay taxes in that country. These unpaid taxes should be enough to help the country to extend social investment, he added.

Silaban concluded by demanding that international social and environmental standards should be mandatory, not voluntary.

You can find a list of Member States and UN bodies’ statements at the FFD3 Plenary here.

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