8 April 2004

REMARKS BY THE CHANCELLOR OF THE EXCHEQUER AT THE MINISTERIAL FORUM ON FINANCING FOR DEVELOPMENT, PARIS

On behalf of Nicholas Sarkozy and myself I want to welcome all of you – governments, NGOs, international institutions – all with your own record of service to the community and the world - to this special conference on financing for development.

It is a particular privilege to have 30 Government Ministers here from all across the world - and I want to thank all of you for coming and, in many cases, travelling thousands of miles to take part. And to thank Anne Krueger, Acting Managing Director of the IMF, and Jim Wolfensohn, President of the World Bank, for their leadership and their presence here today.

I want to start this morning by expressing my gratitude – on the day of the 100th anniversary of the ‘Entente Cordiale’ between the UK and France - to both Nicholas and his predecessor Francis Mer for their support for the International Finance Facility and to the French Government for their offer to host today’s event.

Today this conference is more than an occasion for debate: it is a call to action. And it is a call that is urgent because next year – 2005 – is a crucial, defining year: a year of challenge and a year of opportunity when we will publish the report of the Commission for Africa; a year that will test the might of the whole international community’s resolve to progress towards our goals.

Five years ago, in an historic declaration – in perhaps the most significant international commitment of recent decades – every world leader, every major international body, almost every single country, signed up to the historic shared task of meeting over fifteen years eight Millennium Development Goals – an extraordinary plan definitively to right some of the great wrongs of our time, at the heart of which is a clear commitment to ensuring primary education for every child, the elimination of avoidable child and maternal deaths, and the halving of poverty.

Next year, 2005, is the first date that the first target comes due.

But we know already that the first target to be set and to be met – the 2005 target that ensures for girls the same opportunities in primary and secondary education as boys - is going to be missed. Not only are the vast majority – 60 per cent of developing countries - unlikely to meet the target but most of these are, on present trends, unlikely to achieve this gender equality for girls even by 2015. This is not good enough – this is not the promise that we made.

Take education. Yes, in the past decade, primary enrolments have increased at twice the rate of the 1980s. But consider the 104 million children – 80 million boys and girls in Africa and South and West Asia – who did not go to school this morning. At the current rate of progress more than 70 countries will fail to achieve universal primary education by our target date and in sub-Saharan Africa we will not achieve what we committed to by 2015 until at the earliest 2129. This is not good enough – the promise we made was for 2015 not 2129.

Take health. Just as in the last 40 years the numbers of illiterate have halved so too life expectancy in developing countries has increased by twenty years. But because inexpensive cures are not funded, 2 million die unnecessarily each year from tuberculosis, 1 million die painfully from malaria – curable diseases – 40 million are suffering from HIV/AIDs, and, tragically, on current forecasts sub Saharan Africa will achieve our target for reducing child mortality not by 2015 but by 2165. This is not good enough – the promise we made was for 2015 not 2165.

And take our millennium global poverty target. Although the number of people living in extreme poverty has fallen by 10 per cent in the last ten years, there are one billion people still living on less than $1 a day. Without greatly increased growth, sub-Saharan Africa, the Middle East, north Africa, Latin America, the Caribbean and the transition economies of Europe and central Asia will all fail to see the halving of their poverty by 2015 – and our best estimate is that it will not be achieved in sub Saharan Africa for more than a hundred years. This is not good enough – the commitment we set out was not for 2147 but for 2015.

Too often our world has set targets, reset them, and recalibrated them again so that a global target is only a measure of how far we have failed, not succeeded.

The world did not come together in New York in 2000, come together in Doha in 2001 and come together in Johannesburg and Monterrey in 2002 to make promises for us then to break.

And I believe that the scale of the challenge is such that we cannot leave it to some other time and some other people but must act now, working together.

So when the need is pressing, when it is our generation that has made historic commitments, the simple questions that, to use the words of an American President, we must ask are:

If not now, when?
If not us, who?
If not together, how?

I propose we all commit ourselves, as partners together, to work to make the radical changes required.

Our proposal is for a new compact between developed and developing countries ---- that in return for developing countries devising their own country owned, community owned, poverty reduction plans to expand their own development, investment and trade, and eliminate corruption, the richest countries:

finance, for the poorest countries, the building of capacity to trade and to attract investment;
commit the $10 billion needed each year for education for all;
release at least $10 billion for tackling AIDs, TB, and malaria;
finance sustainable debt relief; and
that we do so by increasing development aid and by, immediately, creating an International Finance Facility that, by leveraging in an additional $50 billion each year until 2015, brings forward the development aid and investment that is essential to meet the millennium goals.

For the richest countries it will mean new responsibilities – to open our markets and to curb protectionism and to transfer resources – but also new opportunities - increased trade and a globalisation that also means both security and justice in every part of the world.

For the poorest countries: responsibilities – to pursue transparent, corruption-free policies for stability and a properly managed opening up of investment, trade and economic growth – and new opportunities – with the capacity for increased growth and trade and a transfer of resources from rich to poor to tackle long standing problems of ill-health, illiteracy, poverty and underdevelopment.

Indeed, our vision of the way forward is that by each meeting their obligations for change all countries can benefit and the millennium goals can be achieved.

Now some might argue that we should focus on making progress in specific areas where we believe the most impact can be made – whether it be AIDs, schooling, health, debt or trade. But while we all support sectoral initiatives, the International Finance Facility proposal is a recognition that, to work most effectively, development has to be funded both predictably and holistically.

Aid has to be predictable, consistent and long term because when funding is stop-go, developing countries can only mitigate short term problems and cannot make the necessary investments in infrastructure and in health and education systems. Unpredictable aid flows make macroeconomic management difficult and add considerable uncertainty to already shock prone economies. And research also suggests that unlike unpredictable aid which is almost always immediately consumed on short term priorities, up to 40 per cent of predictable aid is invested for the future.

And to make real progress, aid is also needed simultaneously across sectors so that impact on investment in one area reinforces the investment in another. To tackle problems in education, for example, we need to invest in health so we can stem the numbers of teachers dying of HIV/AIDs faster than they can be trained, and in infrastructure so that teenage girls don’t drop out of school because there are no sanitation facilities. And to succeed in health we need to invest in cleaner water to reduce deaths from disease, and in education as every year of additional schooling that a mother has reduces her child’s chances of dying by up to 10 per cent.

In the same way, we know that without access to investment and trade there can be no sustainable exit from poverty. But we also know that developing countries also need the capacity to take advantage of these opportunities.

Country-owned Poverty Reduction Strategies are rightly focusing on creating the right domestic conditions for investment and commerce – a stable economic environment, improved infrastructure, and sound legal processes that strengthen property rights and deter corruption. And at the same time, we must also do more to break the trade deadlock, push forward the development objectives of Doha and both open our markets and remove trade distorting subsidies. But must also provide support, including finance, to developing countries so that they can sequence their trade liberalisation and build, with investment in physical and human infrastructure, education and development generally, the capacity they need to trade.

And, similarly, on debt, we know that:

while 27 countries have been freed from the burden of unpayable debt with 70 billion dollars written off;
while debt payments are down from an average of nearly 30 per cent of national income to 11 per cent, with 65 per cent of their income now going to health and education;

we can do more - either through topping up generally, or by specific country by country initiatives – not least for countries facing higher export ratios which prevent an exit from unsustainable debt. And if debt is to be kept sustainable in the future, we will need to provide more aid in the form of grants. So what is clear is that to both go further with debt relief and to ensure a sustainable position for the countries most at risk, we need a facility that can both help relieve debt and fund with grants education, health and poverty reduction.

So in this way we show that the answer on financing these initiatives is pointing in one and the same direction: a facility that can raise the level of resources invested in all areas – education, health, debt relief and economic development – without lowering the level invested in each. Indeed support for the IFF is to recognise that the only chance we have of meeting the millennium development goals is if we advance together as a global force.

Of course, we will have to convince a sceptical world that money for development will not be wasted. But far from aid being bad for development, we know that whilst aid to GDP ratios are currently lower than ever, the productiveness of additional aid is higher than ever. Many donors are untying aid and pooling funds internationally to achieve greater value for money. And developing countries are using funds more effectively by channelling them through poverty reduction strategies – not an imposition of conditionality on the poorest countries by the richest but a recognition of the importance of good governance and institutional reform in improving aid effectiveness and of forging a partnership between us that is rooted in opportunities and responsibilities on both sides.

But in addition to these reforms, I ask this conference to recognise that aid to Africa which was $33 per person ten years ago is just $20 per person now; that the scale of the resources to tackle aids, illiteracy and poverty is indeed in excess of what traditional funding can offer, and I therefore ask all governments round the world both to move towards our agreed target of 0.7 per cent and to, immediately, look seriously at our proposal for the International Finance Facility.

The IFF is founded upon long-term, binding donor commitments from the richest countries. It builds upon the additional $16 billion already pledged at Monterrey. And it leverages in additional money from the international capital markets to raise the amount of development aid for the years to 2015 from $50 billion a year to $100 billion per year. $50 billion that will allow us to attack the root causes of poverty not just the symptoms, and to meet the Millennium Development Goals

By locking in commitments from a wide range of donors, the IFF would also improve aid effectiveness by providing recipient countries with predictable, stable and coordinated aid flows to finance the investments needed to put them on a sustainable and lasting path to poverty reduction, prosperity and participation in the world economy.

And the front loading nature of the IFF means that it can deploy a critical mass of aid as investment over the next few years when it will have the most impact on achieving the targets – saving lives today that would otherwise be lost.

Take the millennium goal of reducing maternal mortality by three quarters. Oxfam’s recent research shows that to reach this target would need investment of just two or three dollars for each mother at risk – simple interventions that would immediately have a huge impact. In the context of current levels of financing this is a huge amount – $4 billion dollars more each year in total. But if we used the IFF to front load the aid that is needed we could get immediately back on track to meet the millennium goal and save 5 million lives between now and 2015.

We will continue to work towards the 0.7 target and to examine – as the French Government are doing through their technical working group - other systematic approaches to financing in the longer term including the Tobin tax, the Soros proposal for special drawing rights and other forms of revenue raising on a world wide basis. But we have to recognise that each one of these proposals will take time and will come down to whether there is sufficient will in all the richest countries to agree these profound changes.

And I believe that the advantage of the International Finance Facility I have described is not just that is a better means of providing the necessary resources immediately and thus far faster than other initiatives, but also that unlike other measures like taxes - where all countries must impose it or it simply can’t work - the IFF can proceed even if some fail to participate.

I thank the growing number of countries who have indicated support for the IFF, many of whom are represented here today. The IMF and World Bank will discuss the conclusions of their report on it later this year. And for our part, the UK Government is prepared to commit additional long term funding to the Facility.

But let me give an example of what we can do today and now.

The Global Alliance for Vaccines and Immunisation is working well – saving lives by distributing vaccines and treatments for AIDs, TB and malaria and achieving value for money. And so far, after just 3 years and with limited resources, GAVI’s work in developing countries has saved the lives of half a million people.

I am pleased to tell you today that GAVI is interested in applying the IFF's principles to the immunisation sector – and has now started negotiations with donors to secure the long term commitments that are needed to frontload the funding available to tackle disease.

If, by these means, GAVI could increase its current budget from $270 million a year to $400 million a year – or over five years an extra two thirds of a billion dollars – it would be possible that their work could save the lives of an additional 2 million people a year.

GAVI could purchase new combination vaccines more quickly which would bring down the price and save the lives of an additional one million children each year.

And GAVI could fully fund its measles programme – saving up to half a million lives each year.

So in one fund, with one initiative, we can glimpse the possibilities open to us if we act together. If we could do the same for health, for schools, for debt, for the capacity to trade, just think how much we could achieved, just think how much better our world would be.

2015 is the fixed point on our horizon – seemingly distant but closer than we think. But it is actually 2005 – as close as can be - that will determine whether we are likely to make the rest of the journey.

Last year – 2003 – the world trade talks stalled and we took a step back from 2002. Let us make next year different.

In 2015 we cannot look back and say:
“It was not us who acted, it had to be left to the next generation”;
“It was not now, but some other distant time in the future”.

That is not good enough.

And as we ask ourselves what kind of leaders we want to be, and as we ask ourselves what we want future generations to say of the leaders who led now, let us resolve that when the need is urgent and our responsibilities clear - and even when the path ahead difficult is hard and long - let us not lose hope but have the courage in our shared resolve to find the will to act. And let us say to each other in the words of Isaiah “though you were wearied by the length of your way, you did not say it was hopeless – you found new life in your strength”.

The strength together to fight poverty, remove destitution, end illiteracy, cure disease.

The challenge for our time and for our generation.

And let us achieve it together.

REMARKS BY THE CHANCELLOR OF THE EXCHEQUER AT THE MINISTERIAL FORUM ON FINANCING FOR DEVELOPMENT, PARIS

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