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DE RUCNDT #0939/01 3042010
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RUEHGV/USMISSION GENEVA 2909

UNCLAS SECTION 01 OF 05 USUN NEW YORK 000939 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPT PASS USTR FOR EBRYAN; 
NSC FOR DPRICE, PBROWN, AND ADEMOPULOS; 
DEPT FOR IO/EDA, EB/ODF, AND EB/OMA; 
USAID FOR EGAT/EG; 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN ETRD ECIN SENV UN
SUBJECT:  FOREIGN AID DOMINATES UN FINANCING FOR DEVELOPMENT 
DIALOGUE 
 
REF: USUN 774 
 
¶1. (U) Summary.  Debate over the alleged failure of developed 
countries to meet their Official Development Assistance (ODA) 
commitments took center stage at the third biennial UN High-Level 
Dialogue on Financing for Development (FFD), held October 23-24. 
Speaking on behalf of the G-77 and China, Pakistan stated that 
increasing ODA flows and meeting the 0.7 percent of Gross National 
Income (GNI) target is an "uncompromiseable (sic), absolute 
imperative."  Notwithstanding this strong rhetoric, Pakistan and 
several other G-77 countries highlighted a number of steps they are 
taking to reform their economies and attract private capital flows. 
Many speakers from the developing world emphasized the importance of 
concluding the Doha round of trade negotiations, with their remarks 
focusing almost exclusively on the need to reduce agricultural 
subsidies. G-77 speakers grudgingly acknowledged the positive impact 
of debt relief through the Heavily Indebted Poor Countries (HIPC) 
and Multilateral Debt Relief Initiatives (MDRI), but called for more 
debt relief, especially for middle-income countries and countries 
not included under HIPC or MDRI. 
 
¶2. (SBU) Summary, continued.  A number of EU countries linked the 
costs of climate change mitigation and adaptation to the FFD 
process, with Germany stating that "halting climate change and 
[achieving] the millennium agenda belong together" and the 
Netherlands saying climate change is "of great importance to the 
Monterrey review."  Several developed and developing countries spoke 
of expanding innovative forms of financing, likely reflecting 
diplomatic pressure by France.  In a well-attended October 24 
roundtable on development assistance, prominent academic Jeffrey 
Sachs criticized the amount of ODA flowing from developed countries, 
lamenting that the "rich world's promise of USD 25 billion in 
increased aid to Africa is equal to this year's Christmas bonus on 
Wall Street."  U.S. Deputy Permanent Representative Ambassador 
Alejandro Wolff gave the U.S. statement at the dialogue, emphasizing 
the role of the private sector and highlighting the considerable 
progress made in all areas of the Monterrey Consensus since 2002. 
The full text of the U.S. statement is at 
http://www.un.int/usa/press_releases/20071024 _257.html.  End 
Summary. 
 
¶2. (U) The third biennial United Nations High-Level Dialogue on 
Financing for Development, held October 23-24, attracted over 100 
speakers from member states, including 40 Ministers, Vice-Ministers 
and other representatives from capitals.  The second day featured 
roundtables covering the six chapters of the Monterrey Consensus 
document (mobilizing domestic financial resources, foreign direct 
investment and other private capital flows, international trade, 
international financial and technical cooperation for development, 
external debt, and "enhancing the coherence and consistency of the 
international monetary, financial, and trading systems").  Several 
well known speakers participated in the roundtables, including 
Columbia University's Jeffrey Sachs and the Deputy Director of the 
World Trade Organization (WTO), as well as business and civil 
society representatives. 
 
USUN NEW Y 00000939  002 OF 005 
 
 
 
Calls for More ODA Dominate Debate 
---------------------------------- 
 
¶3. (U) Notwithstanding the careful balance between private and 
public capital flows in the 2002 Monterrey Consensus document, 
developing countries continued to devote the majority of their 
attention to ODA levels at FFD dialogue.  G-77 members, in 
particular African states, called on developed countries to meet the 
"agreed target" of devoting an amount equivalent to 0.7 percent of 
GNI to ODA.  (Note:  The USG has not accepted the 0.7 percent 
target, agreeing only to "urge developed countries...to make 
concrete efforts in this regard in accordance with their 
commitments" in the 2005 World Summit outcome document.)  The 
prevailing attitude of the developing world, summed up by the 
President of the General Assembly Srgjan Kerim in his closing 
statement, was that developed countries need to meet the ODA target 
"to maintain the overall credibility of the Monterrey Consensus and 
as an essential prerequisite for achieving the Millennium 
Development Goals (MDGs)."  Pakistan's Minister for Economic Affairs 
Hina Rabbani Khar, on behalf of the G-77 and China, stressed that "a 
strong push for enhanced ODA flows particularly meeting the 0.7 
percent target is an uncompromiseable (sic), absolute imperative." 
India called the drop in ODA last year and projected negative trends 
for total ODA flows in 2007 and beyond "a grave concern," and called 
for a "more robust and efficient monitoring mechanism" to track 
these flows. 
 
¶4. (U) Several European countries touted their commitment to 
reaching or surpassing the ODA target and a broad group of developed 
countries emphasized the importance of improving aid effectiveness. 
Portuguese Secretary of State for Treasury and Finance Carlos Manuel 
Costa Pina, on behalf of the European Union (EU), said the EU is 
meeting and surpassing its proposed timeline for increasing its ODA 
and currently provides 57 percent of global ODA.  Japan mentioned 
the importance of ensuring the effective utilization of ODA. 
Canada, speaking on behalf of New Zealand and Australia, said that 
it supports efforts to improve the coherence of aid effectiveness, 
and France echoed its support for increasing the effectiveness of 
aid, noting the September 2008 Accra Conference on Aid 
Effectiveness. 
 
¶5. (SBU) In an October 24 roundtable discussion on development 
assistance, Columbia University economist Jeffrey Sachs expressed 
skepticism about developed countries' commitments to reaching the 
0.7 percent of GNI target, stating that "the rich countries' 
complete lack of interest to help the poor is a shame, and worse, a 
profound danger" that may cause much instability in the world.  He 
lamented that the rich world's promise of USD 25 billion in 
increased aid to Africa is just a "tiny amount", equal to this 
year's Christmas bonuses on Wall Street.  Sachs added that the 
debate on whether or not aid is effective is a "completely phony" 
excuse rich countries use to delay or to decline to commit 
resources. 
 
 
USUN NEW Y 00000939  003 OF 005 
 
 
G-77 Calls for "Improving" the Monterrey Consensus 
--------------------------------------------- ----- 
 
¶6. (U) Pakistan's Khar, on behalf of the G-77 and China, stated that 
"Monterrey suffers from a serious implementation deficit," and "has 
not come far enough towards conceiving a new system of financial 
governance" that addresses the challenges facing developing 
countries.  She called for rethinking "how development and trade 
goals can be reached within the context of continuing inequity and 
discriminatory constraints imposed by the present multilateral 
trading system."  With respect to debt relief, Khar echoed the calls 
of many developing countries to apply debt sustainability analyses 
in a "flexible manner and not premised on the use of subjective 
governance indicators." 
 
¶7. (U) Khar also emphasized the importance of foreign direct 
investment (FDI) "to energize growth and implementation of 
development goals, especially in sectors such as infrastructure," 
and called for the UN and stakeholders to "put together a plan of 
action at Doha to further enhance the ability of the poor and 
vulnerable economies to attract private and multilateral 
investments."  In this context, Khar recommended consideration of 
national guarantee schemes, tax incentives, and "revised 'risk 
rating' arrangements to direct larger private investment flows to 
developing countries which cannot attract such transfers through 
normal market mechanisms."  She also called for stronger regulatory 
mechanisms and greater transparency in the management of new complex 
financial products because of their impact on global financial 
markets and the developing world. 
 
Successes in Attracting Private Capital Flows 
--------------------------------------------- 
 
¶8. (U) Both developed and developing country speakers highlighted 
numerous successful examples of attracting private capital flows 
during the two-day event, reflecting the record levels of private 
sector flows since Monterrey.  A number of developing country 
speakers described the steps their governments had taken to increase 
FDI by ensuring transparency, setting sound macroeconomic policies, 
creating an enabling business environment, and limiting 
counterproductive regulation.  Khar used her country of Pakistan as 
a best-practice example, stating poverty has declined 10 percent. 
Much discussion also revolved around public-private partnerships for 
development objectives, including the pairing of private foreign 
investment and donor funds in infrastructure projects.  A number of 
countries emphasized that migrant remittances--one of the largest 
sources of foreign currency for some countries--also benefit from 
public-private partnerships by further decreasing the transaction 
costs. 
 
Conclusion of Doha and More Debt Relief 
--------------------------------------- 
 
¶9. (SBU)  Throughout the High-Level Dialogue, speakers repeatedly 
called for a successful conclusion to the Doha trade talks, with 
 
USUN NEW Y 00000939  004 OF 005 
 
 
both developed and developing nations expressing their strong 
interest in capturing the benefits of a more liberalized trade 
regime.  Australia and many developing countries, including Brazil, 
India, and Egypt, emphasized the need for reducing agricultural 
subsidies, but made no mention of the economic benefits of reducing 
trade barriers in the industrial sector.  The Deputy Director of the 
WTO noted that making the structural reforms required for open trade 
and growth is politically difficult but necessary.  A number of 
developing countries, especially South Asian nations, stressed the 
need to more systematically address Mode 4 of the WTO negotiations, 
claiming that liberalizing the international movement of labor would 
have pronounced beneficial impacts in the developing world. 
 
¶10. (U) Developing countries grudgingly recognized some benefits 
from the HIPC and MDRI initiatives, but called for the inclusion of 
middle-income countries and those not included in HIPC or MDRI. 
Middle-income countries noted the need for debt concessions in order 
to maintain economic growth and provide for increased social 
development.  As they have in previous years, many low-income 
countries stressed that debt relief initiatives should be additional 
to other forms of assistance and not a substitute for the ODA 
targets agreed at Monterrey. 
 
Climate Change and Innovative Financing 
--------------------------------------- 
 
¶11. (U) Several European and developing countries linked the issue 
of climate change to the forthcoming review of the Monterrey 
Consensus, with German Minister for Economic Cooperation and 
Development Heidemarie Wieczorek-Zeul stating that "halting climate 
change and [achieving] the millennium agenda belong together". 
Dutch Minister for Development Cooperation Bert Koenders similarly 
noted that climate change is "of great importance to the Monterrey 
review."  On behalf of the EU, Portuguese Secretary Costa Pina 
suggested that new financial mechanisms for environmental activities 
should be explored, particularly on climate change and the carbon 
market.  France expressed its wish that the Doha FFD Conference lead 
to new progress towards creating international mechanisms needed to 
address climate change.  Malaysia argued that "if climate change is 
to be one of the main factors impacting developmental efforts in the 
future, it is essential that the (Doha) Conference devote its 
attention to some of the key issues," such as adaptation, and 
climate-related reconstruction and rehabilitation efforts. 
 
¶12. (SBU) Pina Costa trumpeted the EU's leading role in the area of 
innovative sources of financing through initiatives such as the 
airline ticket levy-financed UNITAID, which provides affordable 
drugs to the developing world.  He also mentioned the International 
Finance Facility for Immunisation (IFFIM) and the Advanced Market 
Commitments (AMC) initiative, which are dedicated to research and 
providing vaccinations in developing countries.  France noted that 
innovative financing is "an indispensable complement to official 
assistance" and mentioned the formation of the so-called "Leading 
Group" on innovative financing.  Guatemala and a number of 
Francophone African nations praised the Leading Group, likely 
 
USUN NEW Y 00000939  005 OF 005 
 
 
reflecting diplomatic pressure by France prior to the event.  In a 
rather unique take on the issue, the representative of Nigeria 
suggested that the visa fees charged by developed countries could 
also be a source of innovative financing. 
 
Comment 
------- 
 
¶13. (SBU) Key participants in the FFD process used the HLD to set 
out their initial negotiating positions for the Doha FFD review 
conference, and we expect difficult negotiations over the next year 
on the six main chapters of Monterrey.  We also expect a push, 
especially from the EU, to include newer issues outside the core of 
the Monterrey Consensus, particularly climate change and innovative 
financing schemes.  Despite the many areas of contention, there are 
some areas of agreement.  Most nations acknowledge the important 
role of the private sector in development and the important steps 
governments can take to attract private flows.  The next important 
step on the road to the Doha FFD review conference will be the 
negotiation of a procedural resolution later this fall in the 
General Assembly, which will set out the preparation for and the 
modalities of next year's Doha meeting.  We expect tough 
negotiations over this resolution as well. 
 
Khalilzad