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P 021023Z MAR 06
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UNCLAS SECTION 01 OF 04 PARIS 001304 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB, EUR, AF, WHA, SA, NEA, EAP AND OES 
STATE PASS USAID 
 
E.O. 12958: N/A 
TAGS: EAID EFIN EIND FR
SUBJECT: PARIS CONFERENCE ON INNOVATIVE FINANCING FOR 
DEVELOPMENT 
 
REF: A. STATE 31158 
 
     ¶B. MERTEN-BALL E-MAILS 24 FEBRUARY AND PREVIOUS 
 
NOT FOR INTERNET DISTRIBUTION 
 
¶1.  (SBU) Summary.  President Chirac can call his "Conference 
on Innovative Financing for Development" a success, at least 
by the standards the GOF had very likely set at the outset: 
during the Conference, eleven countries announced their 
intention to follow the French example and institute a tax on 
international air tickets, the proceeds of which will go to 
development.  A larger group of countries, including these 
eleven, will form a "Leading Group on Solidarity Levies" the 
purpose of which was left vague.  Also, Britain and France 
announced their intention to work together on an 
International Financing Facility (funded by air ticket 
taxes), the proceeds of which would go to health and 
education.  Perhaps most importantly for the GOF and 
President Chirac, the event was a public relations success 
providing the president with an opportunity to chair an event 
in which he cast himself as developing countries' strongest 
advocate in the G-8 club.  UNSYG Kofi Annan along with 
participating heads of state, ministers and NGO leaders 
lavished praise on President Chirac for his courage, 
foresight, and leadership in enacting the tax and in hosting 
the conference.  Despite that, it is unclear whether there 
will be any concrete follow-up other than by those countries 
that announced they will implement an air ticket tax.  End 
Summary. 
 
¶2.  (SBU) On 28 February, UNSYG Kofi Annan and President 
Chirac opened the International Conference on New Development 
Financing Mechanisms.  Also present were Presidents Sassou 
Nguesso of Congo (Brazzaville) and Toure of Mali as well as 
Brazilian Foreign Minister Carlos Amorim.  Many developing 
countries sent either a foreign or finance minister.  Those 
that did not were represented by their local embassies. 
NGO's were well represented.  The USG was accorded status as 
"observer" (along with Canada, and at the last minute, Japan, 
and others) and was represented by Embassy Econ Counselor and 
Financial Affairs Officer.  Delegates with whom Emboffs spoke 
seemed surprised that the USG was present at the conference 
at all as our position on the airline ticket tax is well 
known.  Nevertheless, most delegates were pleased that the 
USG did not "ignore" the conference. 
 
¶3.  (U) In his opening remarks, President Chirac spoke about 
how states have been unable to capture and channel the 
economic growth brought about by globalization.  He urged 
other countries to join France and the UK -- and soon, Brazil 
 -- in applying such a tax and asked all participants to 
reflect on other ways to fund long-term sustainable 
development, particularly health initiatives.  To "enhance 
health systems" in the poorest countries, Chirac noted that 
he would be proposing an initiative for the St. Petersburg 
G-8 Summit to "accelerate the introduction of health 
insurance mechanisms that are adapted to the economic and 
social realities of the poorest countries." 
 
¶4.  (U) UK Chancellor Gordon Brown made a brief appearance 
and spoke about the UK's support for France's initiative on 
the air travel tax.  He said the UK and France had "agreed 
today (28 February) to implement" an international financing 
facility (IFF) for immunization to be funded by proceeds from 
the air travel tax and to establish a working group to report 
back before the September 2006 Bank/Fund meetings.  (Note: 
The UK is not imposing a new tax but will "hypothecate" a 
portion of their existing airline ticket tax for development 
purposes.) 
 
¶5.  (U) After Brown's announcement, the conference continued 
with brief presentations on "New Resources for Fairer 
Globalization" from French Trade Minister Christine Lagarde 
(sitting in for Thierry Breton), German Economic Cooperation 
Minister Wieczorek-Zeul, China's Deputy Finance Minister Yong 
Li, the FAO's Jacques Diouf, the World Bank's Geoff Lamb, and 
Henri Rouille d'Orfeuil from the NGO "Coordination Sud."  A 
second session on "Financing for Public Health" featured: 
Jonas Ghar Store, Norwegian Foreign Minister (who welcomed 
the French tax initiative as a first concrete step toward a 
 
PARIS 00001304  002 OF 004 
 
 
global tax regime), Ignacio Walker, Chilean FM, Benjamin 
Radavidson, Finance Minister from Madagascar, Arnad Sharma, 
Minister of State for Foreign Affairs from India, Jong Wook 
Lee, Dir-Gen WHO, Peter Piot, Director UNAIDS, and Richard 
Feachem, from the Global Fund to Fight AIDA, Tuberculosis and 
Malaria. 
 
¶6.  (U) The second day (morning only) featured concurrent 
workshops on IFF and IFFM, co-development and the role of 
remittances, taxation of financial transactions and combating 
tax evasion, and public/private partnerships, local and 
charity initiatives in innovative development financing. 
Econ Couns attended the workshops on remittances (overall 
conclusions: remittances are private money and should not be 
considered as development assistance; remittances are 
nevertheless extremely important to developing countries and 
transmittal should be made cheaper and more efficient; 
embassies and consulates representing immigrant receiving 
countries should make their visa issuance information more 
broadly available to researchers and other government 
agencies to improve the study of immigrants and remittance 
flow) and taxation of financial transactions (overall 
conclusions: IMF rep concluded that taxing financial 
transactions risked causing dislocations and inefficiencies 
in domestic financial systems, despite the rel 
ative success of the system in Brazil; other panelists 
explained that the financial services industries had made 
tremendous profits from globalization and contributed nothing 
to those left behind, a small tax on foreign exchange 
transactions (especially) could be an excellent source for 
development funding; capital flight from developing countries 
is the most pernicious problem facing those countries, unless 
something is done to combat the causes of capital flight, 
increasing aid is of questionable value).  Foreign Minister 
Douste-Blazy concluded the conference with the statement 
repeated in para 7. 
 
¶7.  (U) Chair's conclusion as presented by French Foreign 
Minister Douste-Blazy (he noted that the conclusions were not 
approved by all the participants in the conference and only 
represented the conclusions as understood by the host, the 
GOF): 
 
Begin Text: 
Ninety-three states met in Paris on 28 February and 1 March 
2006 on the occasion of the ministerial conference on 
Innovative Financing for Development organized at the 
initiative of the President of the French Republic, Mr. 
Jacques Chirac, with Mr. Denis Sassou Ngesso, President of 
the Congo Republic, Chairman of the African Union, Mr. 
Toumani Toure, President of the Republic of Mali, Mr. Kofi 
Annan, Secretary General of the Organization of United 
Nations, and Mrs. Graca Machel in attendance.  International 
and non-governmental organizations were involved in this 
event and are listed in the annex.  This conference marks a 
new step towards rallying the support of the international 
community for innovative financing for development.  It 
follows the World Leaaders' Meeting for Action against Hunger 
and Poverty organized by the United Nations at the initiative 
of Brazilian President Luiz Inacio Lula da Silva in September 
2004 and the subsequent signing of the Declaration of 
Innovative Sources of Financing for Dev 
elopment by 79 countries in September 2005.  The idea of 
innovative financing for development is now an issue on the 
agenda of all major international forums and its principle 
has gained broad support on the part of the international 
community.  Substantive technical work has provided solid 
bases for action, as shown by the Report of the Technical 
Group on Innovative Financing Mechanism presented in New York 
in September 2004. 
 
Participants recalled that the Millennium Development Goals 
(MDGs) cannot be achieved in 2015 unless globalization 
becomes more equitable.  In addition to the commitments that 
have already been made, official development assistance (ODA) 
must be increased and made more predictable.  Innovative 
financing sources supplementing traditional ODA will help 
finance over the long term recurrent expenditure that is 
needed to achieve the MDGs. 
 
 
PARIS 00001304  003 OF 004 
 
 
Participants reviewed the different options for Innovative 
Financing for Development sources and noted that it was 
essential to continue discussions at an international level 
on several issues including international solidarity levies, 
the International Finance Facility (IFF) and its pilot 
applied to immunization (IFFIm) in particular, contributing 
to reduce tax evasion and taxing financial transactions, 
facilitating and lowering remittance costs for migrant 
workers, a humanitarian lottery, initiatives on the part of 
local governments, and voluntary contributions from 
individuals and companies such as the recently announced 
"RED" initiative for combating HIV/AIDS.  These issues were 
debated in workshops on March 1, 2006. 
 
The intention expressed by Brazil, Chile, Congo, Cyprus, 
Ivory Coast, France, Jordan, Luxemburg, Madagascar, 
Mauritius, Nicaragua and Norway to implement the 
international air-ticket solidarity contribution was 
welcomed.  Other countries are set to follow suit. 
 
France and the United Kingdom, which have already implemented 
an air ticket solidarity levy, had the opportunity during the 
conference to publish a joint communiqu on innovative 
financing mechanisms. 
 
Participants noted that several innovative sources were 
particularly well adapted to financing health-related 
development programs, although this is not the only sector in 
which they can be applied.  They stressed that the fight 
against HIV/AIDS, tuberculosis and malaria must be carried 
out via the strengthening of developing countries' health 
systems.  National authorities with the help of cooperation 
agencies must take strong and sustainable action to this end. 
 However more efforts must be made at an international level 
to improve access to low-cost drugs if the goal of universal 
access to HIV/AIDS treatments is to be achieved by 2010. 
With this in mind, participants reviewed the proposal to 
create an International Drug Purchase Facility (IDPF). 
 
Participants would like innovative financing for development 
to remain on the agenda of the United Nations and other major 
international forums and will take an active part in future 
discussions on this issue.  They agreed to meet again in 2007 
at a "Forum on Innovative Financing for Development Sources" 
to build on the momentum created in New York in September 
2004, renewed in September 2005 and continued during this 
conference. 
 
Participants have welcomed the creation of the Leading Group 
on Solidarity Levies to fund development which includes the 
following countries:  Algeria, Austria, Belgium, Benin, 
Burundi, Brazil, Cambodia, Cameroon, Cape Verde, Chile, 
Congo, Cyprus, Ethiopia, France, Gabon, Germany, 
Guinea-Conakry,  Haiti, India, Ivory Coast, Jordan, Lebanon, 
Luxemburg, Madagascar, Mali, Mauritania, Mauritius, Mexico, 
Morocco, Mozambique, Namibia, Nicaragua, Niger, Norway, 
Spain, South Africa, South Korea, and the United Kingdom. 
 
End Text 
 
¶8.  (U) We also repeat the announcement which accompanied UK 
Chancellor Gordon Brown's announcement: 
 
Begin text: 
UK/France Communique on Innovative Financing Mechanisms 
 
 
France and the UK have now been working hand in hand for over 
two years in order to put forward the issue of innovative 
financing mechanisms on the international agenda and convince 
as many countries as possible to support these mechanisms. 
 
In the context of the coming international conference on 
innovative financing mechanisms that will be held in Paris 
next week with almost 100 participating countries, we are 
committed to move forward together. 
 
France will contribute to the IFFIm for an average of $100 
million a year during 20 years. 
 
 
PARIS 00001304  004 OF 004 
 
 
The UK will sign up to the Leading Group on solidarity 
levies.  The UK is committed to the achievement of the 
objectives set at Gleneagles regarding the fight against the 
three pandemics, in particular universal access to drugs 
against HIV/AIDS by 2010 and is committed to spend ?billion 
on HIV/AIDS over the next three years, including for the 
purchase of drugs.  It expects at least this level of 
spending to continue over the long-term.  The UK recognizes 
the importance of long-term predictable finance on a 
significant scale to meet the challenge of the purchase of 
drugs, supports the International Drug Purchase Facility 
(IDPF), agrees to work with France on the details as a 
co-sponsor of the initiative and is prepared to make a 
long-term financial contribution. 
 
The UK will also hypothecate part of the revenue from its 
existing Air Passenger Duty to provide a long-term stream of 
finance to the IFFIm and the IFF. 
 
France and the UK will jointly establish a working group to 
consider the implementation of an IFF going to health and 
education and funded by an air ticket levy as well as by 
other revenues from the Landau report.  This working group 
should report back in advance of the September IMF/WB 
meetings.  France and the UK will use their best efforts to 
persuade others to join this group. 
 
End text. 
 
 
 
 
 
 
 
Please visit Paris' Classified Website at: 
http://www.state.sgov.gov/p/eur/paris/index.c fm 
 
Stapleton