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Multinationals outmanoeuvre UN’s sustainability agenda

The historic UN Summit on the new Sustainable Development Goals is only weeks away. Everything is all but agreed. The final-outcome document has been in wide circulation since early August and all that remains now is a photo shoot with world leaders and a massive corporate party in Central Park to usher in a new era of global peace and prosperity.
Ireland, as co-facilitator of this process, has achieved an almost impossible task in pulling the rabbit out of the hat.
The problem is that for all the promises to take “bold and transformative steps” to ensure that “no-one is left behind”, it is increasingly hard to see how this new agreement can achieve anything significant. While “Transforming our World: the 2030 Agenda for Sustainable Development” abounds in ambition – 17 goals and 169 targets in total – it is very weak on the necessary measures to turn this agenda into reality.
The means to implement the new goals were meant to be decided at the third Financing for Development (FfD) Conference, which took place in Addis Ababa in July. This event delivered little in terms of the resources needed to address extreme poverty, inequality and environmental degradation. History may well look back on this as a pivotal moment when state-based multilateralism caved in spectacularly to transnational private interests.
The dawn of a new stream of “plurilateralism” has emerged.
The Addis Conference was the third such conference hosted by the UN since 2002. The FfD process was established in 2000. It was comprehensive, meaning that it had the mandate to look at ALL areas of global finance and economic governance necessary to deliver on the ambitious Millennium Development Goals. It was not restricted to issues of aid, but could make recommendations on tax, debt, trade, and the private sector as well as systemic issues such as economic-governance reform. This was truly revolutionary.
During that first conference in 2002, through strong civil society action, for example, the proposal for a financial transaction tax, which had been ridiculed before, gained formal recognition. Issues of human-development-based debt sustainability were put on the table, as was the idea of a new global economic governance council under UN auspices to temper the power of ad hoc groupings such as the G8 and the OECD.
Since then, however, the FfD process has been dogged by the same political obstruction which has hampered other major international reforms. It was seen as a serious threat to the power of wealthy nations, who prefer to discuss finance behind closed doors in institutions such as the World Bank, WTO, IMF and OECD. They have, therefore, sought to undermine the process at every turn, divesting it of any real power to tackle issues of financial reform, especially issues of economic governance and taxation.
Despite these efforts, the issue of taxation made it to the top of the agenda for the Addis Ababa FfD Conference. Former South African Prime Minister Thabo Mbeki launched a report showing that African countries have lost the same amount in illicit financial flows as they have received in aid in the last 50 years. Annually they lose $50 billion in tax through these illicit financial flows. Multinational corporations based in rich countries, who also set the tax rules, are by and large responsible for this through tax dodging schemes such as transfer mis-pricing. If development is to be funded through domestic resources, this massive haemorrhage of capital needs to be stemmed. As Mbeki said, “we need to stop the bleeding”.
The conference heard calls on the part of the G77 and of civil society for the establishment of a global tax body under the auspices of the UN. Such a body would enable all countries to have an equal say in setting tax rules. This was backed by the report of the Independent Commission on the Reform of International Corporation, headed by Nobel Prize winner Professor Joseph Stiglitz.These calls, however, were blatantly ignored as rich country after rich country, including Ireland, was at pains to state that they prefer to talk about tax in the OECD, a club for rich nations, not the UN.
Ireland’s intervention at the conference was, for the most part, very weak. Despite pressure from civil society in advance to use this opportunity to lead by example and re-interate its commitment to meeting the 0.7% target on development aid by 2020, the government preferred to hide behind the weak EU position. On other controversial issues, such as taxation, it was clear that it shared the broad OECD consensus. Despite its prominent role in the UN process for new Sustainable Development Goals, no new commitments were made.
The focus of most wealthy countries was not even in the main conference room. As has become the pattern at such UN conferences, the main action was happening elsewhere in the many hotel conference suites surrounding the conference venue. The private side-events, many of them invitation-only (though it was not hard to get in if you could find them), represented the main focus of attention. Here the transnational private sector and governments joined forces to launch new ‘blended financing initiatives’. At such events, initiatives can simply be announced rather than agreed.
The ReDesigning Development Finance Initiative backed by the World Economic Forum announced several new initiatives which have the potential to re-shape the development landscape. Whilst the initiatives may have been dressed up in their best sustainable-development rhetoric for the occasion, they are far from sustainable. In reality, they are essentially about replacing the role of public finance with new unsustainable cycles of international debt.
The new “collaborative development financing model”, backed by the online Convergence Platform, describes itself as “a new global platform that generates a flow of credible investment opportunities in emerging and frontier markets from a network of leading investors and financiers. Convergence allows private and public funders to blend their capital, creating more financially attractive, high-quality deals”. It aims to harness $100bn in blended finance towards public private partnerships in the developing world.
The scale of these initiatives, and the effective absence of any alternatives, makes them a serious threat to sustainable development in the future. The only ‘show in town’ for poor countries wishing to provide their public services is now to buy into one of these new public private partnership initiatives and reshape their economies to meet the conditionalities in the process. Such initiatives, as shown in numerous studies from the UK experience, tend to be difficult to manage, highly costly to run, and transfer the risk from the private to the pubic sphere.
Such Private Public Partnerships in developing countries, where accountability systems are already weak, are likely to be disastrous. The overwhelming impact of such initiatives is to narrow the space that national governments have to raise revenues and implement policies on behalf of their electorates and to be accountable to those electorates. In the absence of sovereign debt work-out mechanisms or adequate human-rights and environmental safeguards, bankrupt countries which are bailed out and then beholden to private finance institutions and technicians, who then ‘buy up’ public assets are a real possibility.
For those who believe in a debt-driven world, where global private finance transfers risk to the public purse, and call it development, the Addis Accord was a huge success. The launch of the Canadian blended-finance initiative on the last day of the conference was testament to this. The evangelism of the new approach was intoxicating, as the Canadian launch, attended by five ministers, heads of state, heads of agencies and CEOs of multinationals demonstrated. The holy grail of development finance has apparently been found.
In Addis Ababa, the international community, it seems, has finally thrown off the shackles of the messy, awkward business of substantive, detailed multilateral negotiations and cut to the chase with a new world order dominated by public private blended finance, where issues of human rights and environmental sustainability are tangential, despite the rhetoric.
As Helen Clarke, UNDP Administrator, said at an OECD event at the Irish Embassy during the Conference referring to the explosion of side events and private launches: “people are voting with their feet”.
What happened in Addis Ababa needs to be the cause for some soul searching by NGOs and civil society in general. Despite the presence of thousands of NGOs, more organised than ever before, there needs to be a recognition that the forces of international capital have the power to simply work around the formal multilateral processes.
In this brave new world of ‘plurilateralism’, there is a need for a new analysis of power.
One has to ask how much effort should be spent focusing on international agreements when the driving forces are elsewhere? •


Lorna Gold is Head of Policy and Advocacy with Trócaire