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Results of the conference "Innovative Instruments for Financing Development", Paris 28.02/01.03.06

Peter Wahl

The conference produced a new dynamic for the process of "Innovative ,Instruments for Financing Development”. Even though we can’t call it a breakthrough yet - the commitment of the other big industry nations is still too small - there is progress. Chirac managed to convince some more countries to support his main issue, the air ticket tax. In Europe he convinced Norway, Luxemburg and Cyprus, so that now altogether 13 countries (see list at the end) proclaimed their intention, resp. took corresponding decisions. With the establishment of a "Pilot-group for Solidarity Contributions for Development", including 38 nations (a.o. Great Britain, Spain, South Africa, Germany, Austria, Belgium, South Korea, India, Mexico) an institutional framework was created. It is supposed to assure the follow-up of the process. The group is open for participation of NGO’s.The next important step will be a conference initiated by the Brazilian government and Brazilian NGOs that probably will take place in Brasília next June.

Deal with Great Britain on the IFF

One day before the conference started, France concluded a politically quite important deal with the UK, which intensively advocates its International Finance Facility (IFF) since several years. Thus, the way was paved for the participation of the British minister of finance, Gordon Brown, in the conference. The core of the deal is as follows:

a. Britain diverts a not specified amount for a not specified time period ("a long-term stream of finance") from their already existing air ticket tax to the IDPF (International Drug Purchase Facility), proposed by France,

b. France pledges to spend approx. 100 Mio. USD per year over 20 years for the British project of IFF.

Due to weak international support, the IFF has shrinked heavily. The British government currently estimates to collect about 500 million pound for education and health every year. This is less than 10% of the initially envisaged amount.

The French-British deal is not yet the definitive end to the competition between IFF and ticket-tax. However, it seems that the ticket-tax is now in a better position than the IFF, which in substance is nothing else than the old concept of capital market financed development, guaranteed by governments, as the World Bank is practicing it since ever. Above all, the quick implementation of the ticket tax neutralises the only advantage the IFF had compared other concepts: the immediate flow of money ("front loading”). In view of the straight neoliberal politics by the Blair government, and their often shown attitude to represent US-interests in Europe, this is a diplomatic success of France that should not be underestimated.

Problems of the IDPF

As the implementation of international taxes comes nearer, questions of the use of money become ever more important, as we can see from the IDPF. Here the devil is in the details. Brazil, for instance, indicated to not give all revenues from an air ticket tax into the IDPF, but to spend a part of it for national purposes. If one knows, that Brazil has an own pharmaceutical industry, producing generics against HIV/AIDS, the aim is clear. Indeed, from a developmental point of view, the idea not to throw additional money to the pharmaceutical TNCs is attractive. Insofar, the tax receipts could contribute to solve two problems at once: diseases could be fought and the competitiveness of infant pharmaceutical industries in developing countries would be strengthened. This process could lead to delicate conflicts with the WTO when the first sues about "distortion of competition” by the TNCs (resp. their governments) come to the Dispute Settlement Body.

The second big issue concerning the IDPF is about questions of governance. Since there are already several structures for vaccination and similar programs in place, in which participate big international organizations such as the WHO, UNICEF and the World Bank, efficiency of aid and the prevention of bureaucracy is of utmost importance On the basis of previous experiences, organisations working on HIV/AIDS pointed out, that the tax revenues should in no case fall into the hands of the World Bank.

Positive side effects

Some positive side effects are part of the dynamic:

  • there is a noticeable shift in the discourse on globalization towards a more critical view of the process;
  • more advanced concepts such attempts as the Currency Transaction Tax (CTT) and action against tax evasion remain on the agenda;
  • the attempt to provide leadership by France and to build a "coalition of the willing", has turned out to be successful. This approach is superior to the inflexi-bilty of global multilateralism.

Symptomatically for this shift was the opening speech of Chirac: "At the rate things are going today, globalization, far from bridging this gap, is widening it even further. … Following years of adhering to the widespread illusion that globalizing the economy would be enough to solve all development problems, the international community is finally accepting the need for solidarity.” Compared to the other G 7 governments this is the most advanced position on the issue. Kofi Annan and other speakers from the South took up very much these arguments.

By holding a working group on the taxation of financial transaction and on tax evasion, the French government made clear that they want - besides the air ticket levy - to keep on board also more ambitious projects. Therefore, the CTT and the tax evasion are mentioned in the official summary of the conference even if we will - given the present balance of power - have also to live with more or less problematic pro-jects like lotteries and private public partnership.

Furthermore, one could see that the main blockades come from the EU-commission, the ministers of finance the IMF and the US. But once and again it was shown, that they tried to justify their position with arguments from 5 years ago. They seem not to realize that there are new studies and reports which have carried the debate forward.

The role of Germany

Compared to other industrialized countries, Germany was represented at a rather high level by the minister for development, Wieczorek-Zeul. This is even more noticeable if one knows, that the new government - unlike the former coalition - doesn’t support the air ticket. An interview given by minister of finance Steinbrück some days before the conference made this very clear. After the conference the minister for economy also voiced his disagreement to the tax. In spite of the resistance Wieczorek-Zeul expressed her sympathy for international taxation and went as far as it is possible under these circumstances. She promised to take up the challenge and to fight. It can be expected that she will try to take some energy from the conference to change the governments position. An alignment of Germany to the Chirac initiative would be an important signal which could create further dynamics for the process.

The Role of the civil society

The presence and visibility of civil society in the conference was quite good. For instance there were several NGO speakers in the plenary and in the working groups. Two sectors were mainly present: the development and altermondialist community on the one hand and single issue orientated (HIV/AIDS, Health) NGO’s. For most of them it was a new configuration, but the cooperation turned out to be efficient. Nevertheless, there are some deficits in the self-organization of civil society. To mention the underestimation of the strategic and long term potential of the process. Furthermore the environmental community was almost completely absent. However, the conference in Paris offered new opportunities for increased dynamics in the civil society.

List of the countries that announced an implementation of the ticket-tax:

Brazil, Chile (already in process), Congo, Ivory Coast, France (decided, to be imple-mented July 1st 2006) Jordan, Luxembourg, Madagascar, Mauritius, Nicaragua, Norway, Cyprus.

Berlin, 1.3. 2006