financing the sustainable development goals international conference, accra, ghana 18 march 2015...
TRANSCRIPT
International finance and
international rules?
Financing the Sustainable Development GoalsInternational Conference, Accra, Ghana
18 March 2015Peter Chowla,
Financing for Development Office, UN DESA
All views expressed are personal and should not be considered as the views of the United Nations.
Challenges
International tax cooperation
Overview
ChallengesNeeds and flows
Caveats Water & sanitation
◦ Extra $100 billion annually in capital costs Education
◦ Extra $100 billion annually Health
◦ Extra $50-$80 billion annually Sustainable Energy
◦ Access: $50 billion annually◦ Sustainability: $500 billion annually (all countries)
Immense financing needs
To fill these gaps, public, private, domestic, and international financing needed
Even if 0.7% were reached, ODA alone wouldn’t be sufficient.
At the same time, the private sector which is profit-oriented is◦ Particularly appropriate for productive investment◦ But unlikely to invest sufficiently in social needs, global
public goods where risk-adjusted returns are not high Different financing flows are complements, not
substitutes, as they have different roles and objectives
All sources will be necessary
Net transfer of resources
($ billions) 2011 2012 2013 2014
African direct investment
41.8 35.0 40.0 41.0
African portfolio investment
-11.7 3.5 8.9 -0.1
African other net investment
-9.3 22.3 -73.1 -17.6
Net Private Flows
20.9 60.8 -24.2 23.3
Volatile capital flows
International tax cooperation
Revenue in an age of globalisation
Domestic revenue is the largest and most reliable source for investment in sustainable development
International rules, policies and cooperation often limit what Governments can raise as domestic revenues
There is no agreed definition of IFFs: commercial tax evasion, criminal activity, corruption – domestic and international
Estimates of untaxed off-shore wealth: $6 trillion - $32 trillion
Illicit financial flows (IFFs)
At the domestic level: tax administration◦ Skills and capacity gaps◦ Regulatory capture
At the international level◦ Method of allocating economic activity
Transfer mispricing – particularly intangibles◦ Tax competition between jurisdictions◦ Fiscal transparency rules
Related issues to address
Distributional implications◦ Domestic & international businesses◦ State & business◦ Amongst states
Political economy of intergovernmental negotiations◦ Most MNEs are hosted in OECD countries◦ Incentives for policy makers are skewed
Participation of developing countries in reforms
Considerations for international reform
Assistance for tax capacity building◦Optics – substitution for ODA and other
finance Venue for tax policy making
◦Roles of the UN Committee of Experts on Tax Matters, OECD, Global Forum
Definitions and data Fiscal transparency implementation
◦Multilateral convention?◦Delayed reciprocity?
Implications for Addis Accord
Alternatives to whole transfer pricing reforms◦ Unitary taxation◦ Innovative policies – standardised transfer pricing◦ Cooperative auditing
UN Convention Against Corruption Stolen asset recovery Combatting environmental crimes Overall it speaks to coherence questions:
◦ Global economic governance structures◦ Follow-up process
Implications for Addis (II)
Thank you
Local capital market development
Original sin, contagion
Total debt securities rose from 13% of GDP in 1994 to 54% of GDP in 2010 in upper middle income countries (Laeven 2014)
Local public debt changes◦ Upper MICs: 8.1% -> 31.3%◦ Lower MICs: 35.0% -> 29.2%
Local private debt changes◦ Upper MICs: 2.4% -> 13.3%◦ Lower MICs: 0.9% -> 1.6%
The share of local currency denominated bonds in US investor portfolios has grown from about 2 per cent in 2001 to about 37 per cent in 2011
Local capital markets
Exchange rate risks Portfolio flow volatility Availability of capital to SMEs and domestic
business Market size problems Debt versus equity driven markets
Key issues to address
Macro-prudential regulatory framework – matching this to national needs and situations
Capital account management tools Striking the right balance between stability
and capital availability Environmental, social & governance risks
◦ Corruption may not be the biggest problem given global systemic risks
Considerations for reforms
Support for local capital markets or access to international capital
Appropriateness of Basel III regulations Restrictions on capital account
management contained in investment and trade treaties
Harmonisation of ESG frameworks Regional integration policies
Implications for Addis Accord
* The size of boxes does not represent financing volumes/importance
** There can be cases where international public finance also directly supports the implementation of international objectives*** Sovereign wealth funds handle public money, but are managed like private investors
International Enabling Environment (including fair-trading system, macroeconomic stability, systemic issues, etc.)
National(e.g. poverty/social needs and
investments in national development)
Goals and Uses
Environ-mental
International(e.g. global public goods)
Economic
Social
Domestic Enabling Environment and Policy Framework
Intermediaries
Blended institutions, e.g.• Innovative partnerships, e.g. Global
Health Funds, potential public-private infrastructure funds
Public institutions, e.g.
• Governments• National and regional development
banks• Bi- and multilateral aid agencies• International financial institutions
Instruments, e.g.
Domestic public spending
Grants Subsidies Loans Concessional Non-Concessional
PPPs Guarantees
Bank loans Money markets Bonds Equities Derivatives
and direct investors
Sources*
National public
sources
National privatesources
International public
sources**
International private sources
Private investors
Investors with long-term liabilities, e.g.:
Investors with short- and medium term liabilities, e.g.:
• Pension funds• Life insurance• SWF
• Banks• Cooperative banks• Mutual funds• Hedge funds
A FLOW OF FUNDS FRAMEWORK