Financing for Development

1. Financing for Development SeminarOrganized by: The Dag Hammarskjöld Foundation, UNDP Nordic Office and CONCORD Sweden – 08 October 2013 TakuFundira(Senior Economic Researcher)

2. Trade, Taxation and Transparency • Focus on the three T’s: • crucial as they impact significantly on the economic and human development of most developing countries; • Trade at the core of economic growth in some aspects • Taxation – rather tax evasion reduces the revenue pool for government and limits the government ability to rely on domestic resources to finance its own development needs; • Transparency crucial for any process – current status quo is clogged with loop-holes that promote corruption and with little done to ensure accountability

3. Trade and Development – a complex nexus • Consensus that trade; development; and poverty reduction are interlinked. • Trade and growth are strongly linked, studies suggests – poverty reduction achieved through sustained strong growth. • Caution the translation of trade into growth and of growth into development is far from automatic. • Market access alone, will not bring growth in itself, nor does increased growth automatically lead to sustainable human development. • Countries that develop invariably increase their integration with the global economy – export led growth key…. • countries and sectors that have not developed and remain largely poor have comparative advantage in three main areas – natural resources exploitation; labour intensive manufacturing; and agriculture;…….

4. Trade and Development in Southern Africa All is not lost however! • African countries (SADC included) improved their trading and investment environment; • Attempts at developing common policies (e.g. Agriculture policy; Trade, Investment and Finance Agreement etc.) • The proposed tripartite expanded market – more opportunities; • Regional efforts on infrastructure development a positive; • cross border transport corridors being developed; • One stop border crossing (e.g. Chirundu Border post ; Beitbridge Border Post) • Access to development finance for projects on energy; transport and water;

5. Taxation • Tax plays 4 Key roles: • Revenue generation • Africa is rich and illicit flows have adversely impacted the continent of more that USD 100 billion in tax revenue – a situation which cant continue; • Redistribution • Tax and transfer systems reduce overall income inequality in all countries. On average across the OECD, three quarters of the reduction in inequality is due to transfers, the rest to direct household taxation; • In some countries, cash transfers are small in size but highly targeted on those in need. In others, large transfers redistribute income mainly over the life-cycle rather than across individuals. • Representation • Several studies have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance, while indirect taxation tends to have smaller effects. • Re-pricing • As a means to address externalities

6. Transparency • Governments and citizens are driving improvements to their countries’ governance systems - shaping and demanding open, transparent, accountable and effective governance. • Transparency and open governance should be promoted especially in the following; • Budget transparency -enables citizens to actively and effectively participate in budget processes and also to hold their governments accountable for the effective use of public resources; • Transparency in extractives -Greater transparency around governments’ natural resource revenues (oil, gas, minerals and forests) can enable citizens to hold their governments accountable for their effective usage; • Aid transparency - When governments provide information about what assistance they are providing, to whom, for what and when, recipient governments can better allocate their own spending, other donors can better coordinate their programs, and local citizens can hold their governments accountable for money spent. • Civil society and oversight bodies have a role to play • To secure true accountability and more effective use of public resources, civil society organizations, parliaments, and audit institutions must have the capacity to utilize available information;

7. Campaign for a SADC BIG • The project seeks to further develop existing work on creating a case for a SADC-wide universal cash transfer to all residents within SADC, to be funded by resources from the extractive industries. • The rationale for such a project is based on the notion of economic justice for all by broadening access to the proceeds of such activities beyond the narrow circle of national and international beneficiaries and shareholders of the mining companies and aligned elites. • Extending access to the proceeds of such activities to each and every resident of the sub-region, would alleviate the worst of the destitution currently faced by millions of people, and reduce the critical and unsustainable levels of inequality. • In addition, given the fact that extraction depletes the levels of natural resources, such a scheme would introduce an intergenerational justice between those who oversee the extraction and the development of future generations. • A universal scheme would ensure transparency based on an even handed distribution of resources, reducing the risk of allocation by politicians to win political support for their own gain. It would promote solidarity, and contribute to the regional integration of people and of social and economic policies as is provided in SADC treaties.

8. Way forward • Donors • Need to provide ample policy space for recipient partners to pursue their own development agenda – make the process home grown to ensure ownership; • Act as facilitators rather than stakeholders – vested interests should not be the driving force for providing assistance but rather a common shared vision that; • poverty and inequality are not good for society as a whole; • Sustainable development can only be achieved through cooperation • The right to universal social security should be part of development and economic policies, including international co-operation, of all countries and must specifically be included in the post -2015 sustainable development agenda. • Developing countries • Time to get our house in order; • a new culture - Binding agreements must remain binding and governments held accountable – need for transparency and certainty in markets;