Statement at ECOSOC Financing for Development Forum
Delivered at ECOSOC Financing for Development Forum in New York
The 2018 report of the Inter-Agency Task Force recognizes the improved prospects for financing for development following a global economic recovery. The broad-based upturn and sustained global growth should lift governments’ revenue potential and could enable the private sector to channel more of its resources to meet the 2030 Agenda’s investment requirements. Yet despite improving prospects, the pace of implementation of the Addis Ababa Action Agenda is falling short of expectations and carries attendant risks for the pace of implementation of the 2030 Agenda.
Sound macroeconomic management and financial stability remain prerequisites for mobilizing adequate financing for the SDGs. In this context:
- An unexpected rapid rise in interest rates could generate renewed financial market volatility.
- Debt sustainability is concerning because private corporate debt is high in both developed and emerging markets and some countries with low tax revenues have growing levels of sovereign debt.
- Changing global financing conditions call for stronger macroprudential frameworks, regulation and supervision.
- High and growing inequalities of income, wealth and opportunities undermine productivity and economic growth. The challenge for fiscal policy is not only to generate more tax revenues but also to share the proceeds of growth more equitably.
- Given the rapid urbanization, subnational public finance considerations should be integrated into national urban planning and national public finance strategies.
While grappling with these challenges, each region has embraced the Addis Agenda. Countries are undertaking reforms to strengthen public finances by rationalizing tax policies, reforming tax administrations and fiscal governance, and making public expenditure more accountable. There is considerable potential to enhance revenues through progressive direct taxes, such as the personal income tax (PIT) and property tax and restructuring of tax systems. A one-point increase in a tax administration index, developed by ESCAP, could generate a tax revenue increase of 0.15 per cent of GDP.
Reformed tax administrations could also help reduce tax avoidance and evasion, and control illicit flows. This however needs to be reinforced by global and regional fiscal cooperative and coordinated actions.
Asia and the Pacific remains the only developing region without a region-wide tax organization. We will continue to work with member States and leverage our inter-governmental platform to respond to the 2018 IATF report’s recommendation to establish regional tax organizations in regions without.
Sustainable solutions to ensure household’s access to finance and small businesses are gaining ground across regions. Outreach and penetration to financial services is highest in countries that have a developed lending infrastructure. Innovative mechanisms and products are helping overcome market failures and open new markets. Asia-Pacific is leading the growth of Fintechs and efforts are underway in Latin America, facilitating the cost-effective delivery of financial services through modern technology. The challenge is to develop regulations which ensure financial stability while allowing space for innovation to reduce pervasive financial exclusion. ESCAP is organising a side event on the topic of fintech jointly with the Governments of Bangladesh, Indonesia and Kazakhstan, this evening. In Africa, ECA is working with countries like Kenya to see how to accelerate use of blockchain to deepen financial inclusion.
Private financing is being directed towards sustainable development. Regions are deepening their capital markets by creating an enabling market infrastructure and creating credit rating and bond pricing agencies. The integration of regional capital markets is progressing.
Private capital leveraged through PPPs is now supporting public infrastructure to address expertise and institutional capacities along with service delivery. Governments are working to create a legal and regulatory architecture that provides clarity to public agencies, streamlines project delivery and gives the necessary certainty to private investors. In countries with supportive enabling environments, PPP projects tend to receive higher risk-adjusted returns and are more commercially viable.
Infrastructure projects are now seeking climate friendly solutions with supportive climate and green financing. Yet, excluding China, the climate resilient infrastructure financing gap in Asia alone exceeds 5 percentage points of GDP, well below the average current investments of 3.2 percent of GDP.
Uncertainties surrounding the state of multilateralism and global governance system has implications for compliance with the Addis Agenda. Asia-Pacific developing countries have strengthened development cooperation with their partner countries and emerged as investors in new development finance technology. Besides China emerging as the largest contributor to South-South Cooperation, aggregate ODA from the Republic of Korea, Russian Federation, Thailand and Turkey increased significantly in 2016.
In conclusion, Regional Commission’s efforts towards implementing the Addis Agenda show the value of regional platforms and processes in facilitating, strengthening, and implementing global and national consensus, while bridging the local and national knowledge gaps.