Seoul Financing for Sustainable Development Forum
- By Kathy Zhang
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- 19 May, 2015
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On May 18, 2015, the Korean International Cooperation Agency (KOICA) and the SDSN co-hosted the Seoul Financing for Sustainable Development Forum. This Forum convened over two hundred policy makers, business leaders, academics and civil society representatives to discuss practical initiatives for the Third Conference on Financing for Development to be held in Addis Ababa, Ethiopia in July 2015.
The successes of South Korea’s economic development provided an important backdrop to the Forum. A nation that has gone from recipient to donor in a short period, South Korea demonstrates many key lessons in international development: the importance of international assistance, the vital role of education, the need for effective public and private sector leadership, and finally a positive international orientation. These key lessons provided an important framing to the day’s discussions around four topics detailed below.
The Importance of Financing for Development
2015 is a pivotal year for global efforts on sustainable development. Three international summits – in Addis Ababa for Financing, in New York City for the adoption of Sustainable Development Goals (SDGs) and in Paris for Climate – will set the framework for global policy and investment flows in sustainable development.
To achieve the SDGs, global finance will need to be reoriented towards productive and environmentally sustainable investments. This will require both public and private investments in health, education, infrastructure, climate adaptation and mitigation and other productive sectors in the global economy.
Professor Jeffrey Sachs outlined six key initiatives that should be adopted at the Financing for Development Conference in Addis: 1) Global Fund for Education, 2) A Global Fund for Health Systems, 3) Global Fund for Smallholder Agriculture, 4) An African Infrastructure Investment Bank to support the build-out of African infrastructure, 5) A Multilateral Donor Committee to better incorporate new donors and 6) A Global Partnership for Data Systems. Each of these initiatives requires support from donor and recipient nations as well as the private sector to come to fruition.
The Needed Upgrade of Global Education Financing
Education is an essential element of human development and economic growth. Recent estimates show that the global education sector requires an additional $38 billion to achieve the goal of universal secondary education.
Internationally, the education sector must be given increased focus in official development assistance. International assistance to education is highly fragmented and has stagnated in real terms for over two decades. Institutions such as the Global Partnership for Education have played an important role in catalyzing pooled financing, but needs to be upgraded to a global fund for education to provide strong leadership for the sector.
In spite of tremendous progress in increasing domestic resource mobilization for education, overall, some developing countries continue to underfund education, and many developing countries provide a disproportionate share of funding to more highly educated students. Increased and better targeted domestic funding for education will be a central pillar of financing the education goals.
Climate Financing for COP21 and Beyond
The mobilization of public and private capital towards climate finance is essential for sustainable development. To date, there has not been significant financing mobilized for climate adaptation and mitigation, with most financing coming from domestic resources and multilateral development bank (MDB). It is imperative for the international community to agree to a common definition and timeline for $100 billion of climate finance from developed to developing countries by 2020. The Green Climate Fund will play a critical role in this mobilization and will begin distributing funds in 2016 alongside approved partners.
In addition to increased levels of financing, non-financial barriers must be eliminated for increased climate finance. The regulatory and policy environment in many developing nations is not set up for increased investments in climate-resilient infrastructure and energy systems. A detailed analysis and improvement of these non-financial barriers must be undertaken very quickly to unlock the needed finance.
Improved coordination between public and private investors is needed in climate and infrastructure finance. Risk mitigation instruments from the public sector need to be scaled up to increase the flow of private capital. Infrastructure developers and investors specifically are not coordinated, leading to a lack of new projects and a lack of financing for existing ones. Specific examples of improved coordination between public and private entities in South Korea have demonstrated positive effects for climate infrastructure investments.
Incorporation New Donors into the International System
Countries outside the OECD Development Assistance Committee (DAC) will play an increased role in international development finance over the next fifteen years. Coordination between DAC and non-DAC donors will need to increase significantly for the SDGs to be achieved.
Asia will drive South-South co-operation over the SDG period. South Korea has already begun increasing its partnerships with developing countries in knowledge transfer with the initiation of the KOICA Development Action Program in 2014. Historically, many Asian nations – China, India, Japan, Malaysia, South Korea, for example – have been providers of international assistance for decades. These nations will need to increase co-ordination with Western donors. A new Multi-lateral Assistance Committee should be established to facilitate the coordination and reporting of all donor nations’ development finance.
There are significant challenges of donor coordination, which will only increase with more donors in the system. Tri-lateral coordination, for example, often suffers from different prioritization of sectors between donors as well as the lack of institutional capacity within new donors. Emerging donors will need to develop internal capacity to ensure improved donor coordination.
The OECD is in the process of establishing a new indicator of development finance named TOSSD (Total Official Support for Sustainable Development). This indicator will take into account private and non-state resource flows for sustainable development. These important initiatives must be followed with clear uses in mind.
The Seoul Financing for Sustainable Development Forum provided an important venue to discuss actionable ideas for the Financing for Development Process and the Addis Ababa Conference. The discussions will serve as an input to the United Nations process and the outcome initiatives of the Conference.
