innovative financing for development – experience from france christine rosellini ministry of...

Innovative financing for development – Experience from

FranceChristine Rosellini

Ministry of foreign affairs and international development, France

Tbilissi, 16 décembre 2015

Presentation outline

1. The solidarity levy on air tickets dedicated to health and UNITAID ;

2. The financial transaction tax ;

3. Other innovative mechanisms experimented in France

France’s commitment to the promotion of innovative financing for development

Innovative financing is a prority for France, as we have:

• hold the permanent secretariat of the leading group since the beginning ;

• implemented airline ticket levy to fund health trough Unitaid in 2006;

• dedicated partly its FTT to development since 2012

• But also experienced others innovative mechanisms such as IFFIM, mixed loans, guarantees, bonds or more recently lottery

This table shows the variety of mechanisms experienced by France (source: Dalberg) :

3. The air ticket levy

•Established in France in 2006

•Compulsory and applicable to all flights leaving France

•4 amounts : from 1,13€ to 11,27 € for flights in Europe and from 4,51€ to 45,08 € for flights outside Europe, depending on the class of the tickets.

•Incomes from 160M€ to 185M€ (before the increase in 2014)

Already 1,6 billion euros raised to finance development in 8 years

3. Legal framework of the air ticket levy

• Additional tax to the existing civil aviation one

• Written in the state finance law.

• 2 decrees:

o One indicating the modalities of the tax

o One indicating the allocation of the tax

• Incomes collected by the “Direction générale de l’Aviation civile (DGAC)” which wire them to an account at the “Agence Francaise de Développment” (solidary development fund)

• The Solidary development fund is co-chaired by 3 ministries

The important innovation :

The incomes of the air ticket levy are not put in the general budget of France but are earmarked to development issues.

3. A Tax without negative impact

The tax has been considered without negative impact in diverse official reports:

• In a Government assessment report submitted in early 2009 to the French parliament

• And idem in a French Court of Audit assessment on the use of airline-ticket levy income made in 2010

• Furthemore, Airline companies can benefit by reporting on the positive outcome of the airline-ticket levy, such as Air France which in January 2010 released an article entitled “UNITAID says thanks”.

•However the tax is regularly questioned (recently by a French deputy who was writing a report on the French airline sector competitiveness)

3. The air ticket levy in the world

• Other countries have followed the French example: Cameroun, Chile, Congo Brazzaville, Madagascar, Mali, Maurice, Niger et South Korea

4. The French financial transaction tax (FTT)

Why an FTT?

• First mentionned by James Tobin in 1972 as a way to limit speculation on financial markets, the idea of an FTT has gained importance over the past decade

The Landau report: A moral decision in the context of the economic and financial crisis

The Gates Report: An innovative way to raise more funds for sustainable development, as a complement to national budgets

4. The French FTT: how it works?

Modalities:

0,2% on shares transactions of French companies with market capitalization > 1 billion €

0,02% on high frequence trading operations and CDS

Already 300 million € raised for development between 2013-2015 to Global Fund, GAVI, Health project in the Sahel region (I3S), RWSSI (African Development Bank)

Partly allocated to the solidarity for development fund from 10 to 25% of total revenues but also limited to an annually voted amount

Next step: a FTT at European level (agreement on core principles but still to define rates and allocation)

Other Innovative mechanisms

• AFD green credit lines: 2,2 million dollars between 2006 and 2013 through AFD

• Debt reduction development contracts (C2D): 3,02 billion dollars since 2006

• Guarantees: more than 700 million dollars through ARIZ guarantee and Proparco guarantees between 2008 and 2012

• Climate Bond: 1bn euro raised in October 2014

Perspectives:

• Social investment: AFD tests a Facility for inclusive development economics to support alliance between governement, private sector and civil society

• Encourage citizens contributions to sustainable development

Last but not least: First lottery experience in France

• Launching of a solidarity scratch card in support of the environment by FDJ on November 2015

• Twenty million cards will go to sale

• 4% of game sales will fund ten projects held by WWF France

• Expected amound awarded of 2,4 million euros and 1 million euros guaranteed by FDJ