Funding the UN's new Sustainable Development Goals

At the end of this year, the United Nation's Millenium Development Goals (MDGs) will be replaced by a new global development agenda, the Sustainable Development Goals (SDGs). This week politicians and finance experts from around the world are meeting in Addis Ababa, Ethiopia to discuss ways to finance the agenda. DW asked Eva Hanfstängl, an expert on development financing at "Bread for the World" Germany, and delegate for VENRO, the umbrella organization of 120 German development and humanitarian NGOs, about the prospects for raising the estimated $3.5 to 4.5 trillion needed annually to implement the goals.

DW: At the start of the conference in Addis Ababa, UN Secretary General Ban Ki-moon demanded world leaders "put aside narrow self interest" to agree on financing the new development agenda. Are they trying to live up to this spirit?

Yes and no. On the one hand you have very nice speeches. Every country sends high level ministers, heads of state, who deliver speeches about their ambition - what they want to give to the world to finance development. If you listen to the speeches you think yes, the world will change.

However, behind the scenes are closed groups of negotiators. And here there is the real crisis. The interest groups that Ban Ki-moon mentioned are quite strong. Even within the G77, the developing countries, there is friction between those in the emerging markets – the BRICS countries - and the least developed countries who are feeling neglected. And then you have the EU coming in with their own problems, like Greece.

One major point of disagreement has been a proposed global tax body - which the G7 and the EU on one side and the Group of 77 developing countries disagree on. Why is this such a big problem?

This was the only process started by the developing countries in 2002 – by the Latin American countries together with Asian countries which were emerging from the Asian crisis.

And you have a strong force from the developing countries who say we need coherence – worldwide coherence of the necessary policies. One is taxation. Because you have this race to the bottom, tax competition. Big companies saying either you give us incentives - low taxation, or no taxation - or we go to another country. So at the national level there is a feeling of powerlessness. Developing countries complain that through this system, possible tax is avoided that is three times higher than the official development aid.

So they say we need global rules. And it cannot be done at the OECD level alone, that is a club of the rich countries. We want to sit at the table.

It emerges as a tax issue but the core question is in which direction the world is going in the next 10 or 20 years. And this problem is huge.

Many developing countries have seen substantial economic growth in recent years but very little has trickled down to the poor. With tax evasion and corruption such huge problems, is it realistic that in the future developing countries will be able to raise more money for development themselves?

Sure. But we need to strengthen the administrative capacity of those countries. Everyone sees that, even the developing countries themselves. But that needs money. You need expertise and technical cooperation. But on the other hand you have a lack of political will. In many countries you have an elite who are at the same time the political leadership. And they have no interest to establish something like progressive taxation - to tax the rich more than the poor - to tax big business. There is a lack of will.

Breaking that down is a huge task for civil society, 600 civil society organizations worldwide met here ahead of the conference and we are all united in this view, that we must have our governments accountable, introduce progressive taxation, get the money right, strengthen the policy capacity, to get the house in order. At the same time you need international agreements.

For several decades, rich nations have promised to raise their official development assistance (ODA) to 0.7 percent of their gross national product, but so far they have not done so. Even if there's another promise now, how credible will it be?

It's embarrassing for us as Germans. We're reaching 0.4 percent but it's not enough. We are breaking our promises. And it is embarrassing that the EU says, "well perhaps in 2030," so they are prolonging the time until the promise is kept. But this is the minimum we have to expect if we are to meet the challenges of the future. And there are new challenges such as climate change financing.

So we need new financial resources, like the financial transaction tax, which could create an enormous amount of money with a very low rate of taxation of 0.01 percent on each financial transaction across borders around the world. Here you could create a lot of money that could be contributed for sustainable development.

Realizing the sustainable development goals is expected to cost $4.5 trillion annually over the next 15 years. With the financing instruments currently in place, there is still a gap of 2.5 trillion dollars every year. What balance of aid, private investment and domestic tax revenues could close this gap?

The big solution that the governments are trying to sell to poorer countries is private investment - to tap the speculative money that going around the world and channel this private, profit-seeking money into long-term investments. That could help finances some parts of the SDGs.

We think, yes, there is a of money that could help establish the infrastructure needed in many countries. However, you need strong political guidance so that this money is not just profit-seeking but can really contribute to sustainable development. What you need is to strengthen the capacity in those countries for administration and political guidance of this money - to have impact assessments, planning. Otherwise this will not lead to development.

How optimistic are you when you look into the financial future of development?

We were disappointed from the start when we saw the draft in preparation for Addis because it was too business-friendly. The focus is on the private sector. This is one element, but we need safeguards, human rights standards, we need political guidance, we need an instrument to prevent a future debt crisis – that's another danger we see. All of this is missing. You have little on taxation, you have nothing on debt, almost nothing on trade, nothing on financial architecture.

On the other hand, if this private sector investment works it could push a lot. China is selling its model as the new international development model for the south. China developed a lot that that could work. However, we need human rights standards. But as a faith-based organization we never give up hope!

The interview was conducted by Anke Rasper and has been condensed and edited for clarity.