The UN and the Leading Group on Innovative Financing for Development have organised a side event on Innovative Financing 22 June 2012.
Side event on Innovative Financing 22 June 2012
- I am very pleased that the UN and the Leading Group on Innovative Financing for Development have organised this event together. The Leading Group needs the channel for its engagement that the UN can provide. With the appointment of Philippe Douste-Blazy as special representative for innovative financing for development, the UN Secretary-General has created a space within the UN to promote this important issue. Dr Douste-Blazy is a key driver in this field, and was in fact one of the first people I met when I was appointed Minister of International Development. I would also like to commend France and the Secretariat of the Leading Group – and not least civil society – for their valuable contribution to putting innovative financing on the global agenda.
- Norway allocates 1 % of gross domestic income (GNI) to official development assistance. Innovative financing should not be an excuse for states not to deliver on official development assistance commitments, but should be an additional, substantial and predictable source of funding.
- There are enough resources in the world, but they are not distributed equitably. Therefore we need fairer and more equitable distribution of wealth between countries and within countries. Innovative financing can help to promote this.
- Through solidarity levies on plane tickets, rich people can contribute to the provision of vaccines and medicines to combat diseases in poor countries. Norway supports various innovative initiatives in the health field, such as UNITAID, the International Facility for Immunization (IFFIm), the Global Alliance for Vaccines and Immunizations (GAVI), Advance Market Commitments (AMC), and the Global Fund to fight AIDS, Tuberculosis and Malaria (GFATM).
- The Norwegian Government’s policy platform sets out that the Government will promote the introduction of global taxes that limit the adverse effects of globalisation and create global redistribution mechanisms. Such taxes include aviation taxes, carbon emission taxes and taxes on arms trade and currency transactions.
- Businesses that have benefitted from globalisation should help those who have been left behind. The global financial industry is one that has benefitted most from globalisation. And therefore there is a good case for a tax on financial transactions. Norway is one of the 14 countries that so far have signed the Leading Group declaration in support of a tax on financial transactions for development. I urge more countries to come forward and do the same.
- The foreign exchange market is more than 40 times larger than international trade in goods and services. If we put a very small levy on this trade, it could provide a substantial part of what is needed to fight global poverty and climate change.
- An expert report from Leading Group countries has indicated that a levy of only 0.005 % on currency trade could generate close to USD 40 billion a year. That means a negligible 5 cents for a 1 000 dollar transfer. The experts make it clear that this can be done with little market distortion. Some may ask: Can we afford to do this? I would rather ask: Can we afford not to?
- The financial sector has profited from the support it received from governments during the financial crisis, and will continue to benefit from the opportunities offered by globalisation. A currency transaction levy can be viewed as a reasonable contribution from the financial sector to global stability and sustainability. The revenues should go to development, climate change measures and global public goods.
- The same applies to levies on air and sea transport. This was pointed to in the report of the High-level Advisory Group on Climate Change Financing, which was appointed by UN Secretary-General Ban Ki Moon and chaired by Ethiopian Prime Minister Meles Zenawi and Norwegian Prime Minister Jens Stoltenberg. The polluter-pays principle should be implemented in this context too, and the revenues should be used to fight climate change.
- Approximately ten times more money leaks illicitly out of developing countries than the amount of official development assistance these countries receive. The global shadow financial system facilitates huge illicit financial flows out of resource rich countries. Bank secrecy conceals the proceeds of organised crime and corruption, and makes tax evasion and trade mispricing a lot easier. This is basically a system where money is flowing from the poor to the rich. I am happy to say that the fight against illicit financial flows is mentioned in the final Rio+20 declaration, the first time ever in a UN summit meeting.
- Fighting illicit financial flows is not rocket science, but boils down to political will. Transparency is the key issue. For financial centres, this means that they must provide details on money flows, keep registries of the real ownership of companies, and exchange information with relevant parties.
- For companies, this means that they must be open about their economic activities. The introduction of a country-by country reporting (CCR) system could increase transparency significantly. Norway therefore works to achieve a better and more robust EU legislation in this field than proposed by the EU Commission. It is good that companies are open about payments to governments. This is important in the fight against corruption.
- But CCR requirements should go further. They should also help to uncover tax evasion, link the amount of extraction to paid tax, and through this achieve transparency in the natural resource sector. Norway aims to implement provisions on CCR from 1 January 2014, although the EU legislation will enter into force at a slightly later stage. This legislation should be evaluated after three years, not five years as proposed, and this evaluation should also consider whether reporting requirements should be extended to other sectors than the extractive industries.
- The Leading Group has established the Task Force on Financial Integrity and Economic Development to fight illicit financial flows. I encourage all interested parties to join. I also encourage resource rich countries to join the Extractive Industries Transparency Initiative (EITI).
- I started out by saying that there are enough resources in the world; the problem is that they are not distributed equitably among countries and within countries. Inequality is increasing and discussions on inclusive growth and mechanisms for redistribution should also be part of the overall discourse on innovative financing.
- Thank you.