Is it a public or a private business?

 Yesterday, my second day at the Financing for Development Conference started with the side event organized by ODI on the the importance of public finance in eradicating poverty and it ended with an IDDC co-hosted side event on the costs and benefits of private financing in sustainable development.

During the FfD process, IDA and IDDC advocated for progressive increase of domestic and international resource allocation to ensure access to necessary disability support services, including social protection schemes aimed at the full inclusion of persons with disabilities. We know that public resources are not sufficient and that private sector ones are needed. This is why we also advocated for safeguards to be put in place to make sure that development assistance activities do not create or perpetuate legal, institutional, attitudinal, physical and ICT barriers to the inclusion and participation of persons with disabilities.

Romilly Greenhill, one of the authors of the ODI’ report Financing the Future – How international public finance should fund a global social compact to eradicate poverty, highlighted that the global compact should focus on 3 key areas and that these should be funded by public money to ensure best results, which means that they reach the poorest and most marginalized:

  • Social protection for the poorest
  • Free basic universal healthcare
  • Free primary and secondary education for all.

In the latest draft of the Addis Ababa Agenda, Para 12 had good language on social protection: “we commit to a new social compact. In this effort, we will provide fiscally sustainable and nationally appropriate social protection systems and measures for all, including floors, with a focus on those furthest below the poverty line and the vulnerable, persons with disabilities, indigenous persons, youth, and older persons.”

As for education, although Para 78 could be strengthened (see the recommendations by the Global Campaign for Education on Education and Financing), it is worth remembering that it underwent significant improvement given that previously it didn’t speak of “inclusive” education and there was no mention of children with disabilities.

“We recognize the importance of delivering quality education to all girls and boys to achieving sustainable development. This will require reaching children living in extreme poverty, children with disabilities, migrant and refugee children, and those in conflict and post-conflict situations, and provide safe, non-violent, inclusive and effective learning environments for all. We will scale up investments and international cooperation to allow all children to complete free, equitable, inclusive and quality early childhood, primary and secondary education, including through scaling up and strengthening initiatives, such as the Global Partnership for Education. We commit to upgrade education facilities that are child, disability and gender sensitive and increase the percentage of qualified teachers in developing countries, including through international cooperation, especially in LDCs and SIDS.”

Overall ODI’s Recommendations for the FfD Conference are the following:

  • Commit rich countries to giving 0.7% of their national income in aid
  • Bring emerging economies into the system as contributors
  • Redirect 50% of foreign aid budgets towards poorest countries where aid is most needed
  • Develop smarter, more flexible and long-term ways to provide aid
  • Create or expand global funds for health and education in humanitarian crises and social protection.

The side event that we co-hosted in the afternoon on the private sector talked about the same issue, but from a different perspective, as it highlighted the risk of private financing and in particular PPPs (as we also stated in IDA IDDC policy paper on FFD).

The negotiating text of 19th June included good language on PPPs – that language has been watered down in the July 7 version (from the CSO statement drafted at the CSO Forum):

July 7 Para 48: We recognize that both public and private investment have key roles to play in infrastructure financing, including through development banks, development finance institutions and tools and mechanisms such as public private partnerships, blended finance, which combines concessional public finance with non-concessional private finance and expertise from the public and private sector, special purpose vehicles, nonrecourse project financing, risk mitigation instruments and pooled funding structures. Blended finance instruments including PPPs serve to lower investment specific risks and incentivize additional private sector finance across key development sectors led by regional, national and sub-national government policies and priorities for sustainable development. For harnessing the potential of blended finance instruments for sustainable development, careful consideration should be given to the appropriate structure and use of blended finance instruments. Projects involving blended finance, including PPPs, should share risks and reward fairly, include clear accountability mechanisms and meet social and environmental standards. We will therefore build capacity to enter into PPPs, including as regards planning, contract negotiation, management, accounting and budgeting for contingent liabilities. We also commit to hold inclusive, open and transparent discussion when developing and adopting guidelines and documentation for the use of PPPs, and to build a knowledge base and share lessons learned through regional and global fora.

June 19 Para 47: We recognize that both public and private investment have key roles to play in financing sustainable and resilient infrastructure, including through development banks and other development finance institutions. Blended finance, which pools concessional and non-concessional resources and expertise from the public and private sector, offers significant potential to contribute resources, expertise and technology transfer in support of sustainable development. It is, however, important that careful consideration be given to the appropriate use and structure of pooled financing instruments. Projects, including PPPs, should be transparent, provide affordable infrastructure services, share risks and rewards fairly, and be implemented following feasibility studies that demonstrate that they promote sustainable development, meet social and environmental standards and are the most effective modality, taking into account regional, national and sub-national policies and priorities. Blended financing vehicles, including PPPs, should include clear accountability mechanisms and should not replace or compromise state responsibilities. Governments should also ensure that such instruments do not lead to unsustainable debt burdens. We will strengthen capacity building for PPPs, including in planning, contract negotiation, management, accounting and budgeting for contingent liabilities. We encourage holding inclusive, open and transparent discussion on principles and guidelines for PPPs, and to build a knowledge base and share lessons learned through regional and global fora.

We heard that the only sticking point in the text is the issue of tax. However, the fight for strong safeguards for private sector investments must continue. Implementation is going to be key.

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