Financing for Development

(FfD) Monterrey-Consensus

New development partnership based on a framework of mutual accountability between:

Developed and developing countriesPublic, private and civil sector

Instruments (among others):

Establishing an investment climate to attract private capital

Mobilize domestic financial resources

Promote improved market access

Private Sector(Definition)

• Privatisation

• Private-Public-Partnership (PPP)

• TNE

• Private capital flows

• Business – Civil society engagement

• Domestic private sector (SME)

Business – Civil society engagement

• EDF – McDonald‘s on solid Waste Management

• Clean Clothes Campaign

• WWF

• Max Havelaar /Fair Trade

etc.

See IDR Reports Vol 17, No 1, 2001 (www.jsi.com/idr)

Domestic private sector

Small and medium enterprises

(SME):80 % of all jobs.Poor policies, institutions, lack

of finance, many barriers (Hernan de Soto).

Effective support of small scale enterprises

Reform and restructuring of the domestic banking system (micro-finance schemes)

Improvement in property rightsEffective public services (rural

roads, electricity, water)Targeted subsidy systemsTechnical assistance

Private Capital Flows

Different forms of private flows:

Bank Lending, Bond Financing,

Equity flows (PFI), Foreign DirectInvestment (FDI)

Long-term capital flows to poor countries

External financial flows

Foreign Direct Investment (FDI)

• Resistance to crisis• Concentration:

Top 10 countries: 73 %Top 30 countries: 93 %(Market size/Investment climate)

• Regional concentrationChina: 90% of FDI in coastal regionsMexico: central states/bordering states to the USAIndia: 75% for the top 5 states (Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi)

• Free production zones• Reflows, Outflows

FDI and Mergers in DC

FDI as ratio to GDP

FDI:Requests

• Broader repartition

• Backward and forward linkages

• Greenfield Investments

• Reinvesting earnings

• Social and environmental standards

• Transfer of technologies, Know-how

• Training

Privatisation

• A cure for economic‘s ill?

• Unproductive state enterprises with huge losses

• Poor control mechanism: corruption

• Poor competition level: new monopolies

• Red carpet policies

• Goal: raising large sums for

Public-Private-Partnership (PPP)

• Central Issue

• Actors: UN, WB, REB, Bilateral donors, DC, etc.

• Forms: - Commercial relations- Institutional cooperation- Normative-regulating cooperation- Strategic cooperation- Infrastructure

PPP in infrastructure

• Water, sanitation, environment, health, education, transportation, Telecoms etc.

• Attracting private capital

• New role for governments: retreat from former role as owners, new focus on regulator

• Goals: improved efficiency, fiscal benefits, improved access, risk sharing

PPP in infrastructure (2)

• Forms: Management contract, Leases, Concession, Divestiture

• Risks:- Complicated procedures- Corruption- Red carpet (subsidies)- Participation- No „free lunch“, costs must be paid by users or by taxpayers- Credibility of private partners- Rules of the game, regulation capacity

PPP: requests

• Civil society participation

• Transparency

• No conflicts, no opposition

• No bad repudiated companies, corporate responsibility

• Standards and codes

• Technical assistance and capacity building

• No high risks

Global Compact

• 9 principles agreed between UNO and the business community

• Different interest: Undermining values and mission of the UN, creeping privatisation of the UN?)

• Volunteer, no binding rules

• PR/blue washing of TNE?

OECD Guidelines for TNE

• Guidelines for TNE, recommended by OECD countries to the TNE

• Binding for OECD countries

• Volunteer,not binding for TNE

• Set by Northern countries

• Lack of transparency