Reflections on the Financing for Development Conference
On the 13th - 16th July 2015 Heads of State met in Addis Ababa, Ethiopia, to decide where the money will come from to end poverty and sustain our planet, aiming to fill an estimated USD2.5 trillion funding gap to meet the fifteen year Sustainable Development Goals which world leaders will agree in September. Addis Ababa was a fitting place to meet being the diplomatic capital of Africa set in a country which has averaged double digit growth for the last decade, also predicted to be the fastest growing economy in the world from 2014-2017. Looking out to the conference venue, surrounded by construction sites, was nonetheless a reminder that even in high growth economies there remains a long journey ahead.
In the Same City but in a Different Room
A record breaking eight hundred business representatives registered for the Conference - more than have attended any prior UN convened conference. Few were visible at the main conference venue. Instead, it was the surrounding hotels which were alive with the buzz of private sector energy.
The main Conference comprised a series of plenaries, committee meetings and roundtables. Bizarrely three of the six roundtables had an identical focus on 'the enabling environment' and the other three on 'the global partnership'. Six business representatives could be registered to speak for three minutes from the floor at each roundtable, yet few were given the chance. Despite the protocol and instructions from the Chairs, the roundtables were mostly a sequence of prepared remarks and it is difficult to see how this progressed the Agenda. Perhaps anticipating this, most business leaders instead opted to participate in side events which ran concurrently with the main Conference.
There were close to 150 side events which made selection somewhat challenging. World Bank convened events were popular with the private sector whilst civil society convened events failed to draw any noteworthy private sector participation. Both the private sector and civil society are important development actors. Failure to get them in the same room reduces the likelihood of resources being deployed in an optimal way to benefit the poor and the planet.
In the absence of civil society participation in infrastructure financing discussions, I can see the risk of economic infrastructure being prioritised over social infrastructure. In the absence of private sector participation in accountability discussions, I can see the risk of donor and civil society accountability being prioritised over private sector accountability to the communities in which they work.
In addition to the plethora of side events, there was a one day International Business Forum attended by several hundred business representatives. There was an impressive line-up of private sector, government, development bank and United Nations speakers - but again civil society was almost entirely absent. Realising there was no formal feedback loop from the International Business Forum back to the main Conference, it was fortuitous that the next day my colleague - Serena Brown - used her 3 minutes in a global partnership roundtable to share her key reflections from the Forum. These included the private sector's energy and conviction that success will come from multi-stakeholder collaboration and scaling innovations.
Private Sector Infrastructure Financing as the Panacea for the World's Woes
This was a hot topic in Addis Ababa and as my KPMG colleague James Stewart noted on his panel: undoubtedly infrastructure is a primary enabler for sustainable development. Infrastructure underpins access to shelter, water, power, health, education and trade.
There is cause for optimism. The long-term horizon of pension funds and life insurers can align with the long-term payback period of infrastructure investments. Insurers with excess capital, as well as other institutional investors uninspired by low interest rates, may be more inclined than usual to look to non-traditional investments.
In Addis the energy to overcome the challenges was palpable. New initiatives announced at the Conference and in the preceding months aim to improve project preparation capacity and thus the pipeline of investable projects. People debated the value of governments, sovereign wealth funds and development banks focusing their investment in green-field projects and then transferring them to institutional investors. There was also an excitement about scaling up blended financing for infrastructure.
In all the discussions there seemed to be broad consensus that development banks hold the golden key for de-risking infrastructure projects and unlocking high levels of private sector finance. It will be interesting to do the calculations to see how much of a dent this can realistically make in the infrastructure financing gap - recognising that development banks do not have a bottomless pool of funds and broader challenges remain.
Business Revitalising 'The Global Partnership'
A 'revitalised global partnership' is at the heart of financing for development discussions. Although in Addis Ababa Member States reaffirmed their responsibility for organising this partnership, global and local governance structures will need to briskly sharpen their focus or otherwise risk being side-lined by ambitious business leaders committed to shift the dial from billions of dollars of aid for development to trillions of dollars of investment. Member States understandably view this as a threat to their sovereignty.
Business leaders are accustomed to acting quickly to survive and thrive, constantly innovating and improving their company's operations. In Addis Ababa business leaders displayed this same enthusiastic spirit to innovate and beat the challenges facing the poor and our planet.
I fully support the move to global multi-stakeholder partnerships, whilst recognising these need to be under-pinned by nationally driven strategies, plans and accountability mechanisms. In reviewing the growing list of global partnerships and initiatives - extended in Addis Ababa - I am impressed with the profoundly positive influence of the private sector. The vision, leadership and sense of urgency is very often catalysed by business network organisations such as the United Nations Global Compact, the World Economic Forum, the World Business Council for Sustainable Development and industry associations - as well as a growing list of enlightened multi-national companies and corporate philanthropists.
Even on the issue of tax, long the realm of charity advocacy teams, many companies are stepping into the debate - despite some charities still adopting a highly adversarial tone. I am proud that KPMG is supporting and sponsoring a consultation, hosted and curated by think tank CoVi, exploring the meaning and purpose of responsible tax for the common good and what responsible tax behaviour looks like. One of KPMG's tax leaders, Jane McCormick, was also in Addis Ababa speaking at an event hosted by the Independent Commission for the Reform of International Corporate Tax and the Friedrich Ebert Stiftung.
Achievements in Addis Ababa
The diplomatic power of the United Nations in securing agreement from 193 UN Member States on the Addis Ababa Action Agenda should be applauded. It forms a strong foundation for honing the sustainable development 'means of implementation' and country level plans.
Of at least equal significance was the flurry of large scale global partnerships, commitments and initiatives announced in Addis Ababa and in the preceding weeks. These were powerful expressions of the growing conviction that we will end poverty and sustain our planet by working together as the private sector, government, the United Nations, civil society, development banks, sovereign wealth funds and academia. The private sector will save the poor - but not on its own.