The Rainmakers in Addis

July 14, 2015
Related: Podcast with Owen Barder

The rainy season, known as kiremt, began in earnest today in Addis Ababa, host city for a huge UN conference on Financing for Development. The arrival of kiremt is good news for the farmers in Ethiopia’s highlands, but bad news for the thousands of delegates from government, business, and civil society sploshing in their Birkenstocks through the puddles between the hotels and the UN conference centre.

Addis Ababa streetscape

There is good and bad news too from the conference.

The good news was put succinctly by an African Finance Minister: at last we are talking about the right things. This is a meeting about jobs, investment, and growth; not a meeting about aid.

This is a new and welcome framing for development cooperation, and it can be regarded as an early success for the new Sustainable Development Goals (SDGs), even before they are finalised. Whereas the eight Millennium Development Goals called on the world to focus on providing basic services to the poor — and so focused attention on foreign aid — the 17 SDGs pull the focus out to a bigger picture of shared prosperity and environmental sustainability. And this new framing of the development challenge is reflected in the scope of this discussion on financing: after all, it will be private finance, not aid, that generates the 600 million additional jobs that developing countries must create in the next 15 years.

I’ve been pleasantly surprised by how little opposition there has been in Addis to this change in the dialogue. I am not surprised by the welcome from developing-country governments who have been calling for this for many years; but I feared more opposition from international NGOs and civil society, whose attitude to private enterprise has in the past wavered somewhere between suspicion and hostility. Those concerns seem to be receding — perhaps in part because the message is being received so clearly from developing countries that they would rather have jobs than aid.

Financing for Development Conference

The three development conferences in 2015 mark an important transition. At the first Financing for Development conference in Monterrey in 2002, it was possible (just) still to think of the world as divided into rich countries and poor countries. The Monterrey Consensus was largely about what rich countries would do to help poor countries meet the MDGs, which had been agreed two years earlier at the Millennium Summit. At the third Financing for Development Conference here in Addis, that binary distinction is gone. Middle-income countries are providers of capital, technical assistance, and foreign aid to the developing world, and they are simultaneously home to two-thirds of the world’s people living in absolute poverty. There are now just 31 low-income countries, following the graduation this month of Bangladesh, Kenya, Myanmar, and Tajikistan, so it no longer makes sense to think of the world as divided into rich and poor countries. We are a global community now, with shared problems whose solutions lie more than ever in international cooperation.

But there is bad news too.

First, the breadth of the Addis Ababa Action Agenda is matched by its shallowness. Nobody is making any meaningful commitments; there is nothing here against which anyone can be judged. This might be why there is so little conflict about the contents of this agreement: perhaps nobody thinks it matters.

Second, there is a tendency to alchemy. Additional finance will not come from communiqués; and there is a limit to what we can do with clever innovative finance schemes. The constraint on investment in developing countries is not a lack of internationally mobile capital: it is the lack of a pipeline of investible propositions. And too little of what we have heard so far in Addis has convinced me that this will change.

Third, the conference is doing a better job of setting the stage for September’s summit on the SDGs than it is of helping to make a success of December’s summit on climate change. Without an agreement to put a stop to climate change, the rest of the year’s discussions will be wasted. The way to bring serious financial resources to bear on the transition to a low carbon economy is to put a price on carbon. Furthermore, putting a value on the planet’s environmental resources will generate more income for developing countries than anything else under discussion in Addis. A carbon price is mentioned in passing in the Addis Ababa Action Agenda, but it needs to be right at the heart of any future discussion of development finance.

And fourth, as I argued before the conference, there is too little recognition of the wealth locked up by policies and behaviour which distort the global economy, creating massive economic, environmental, and welfare losses for most of the world’s population. There is too much attention to resource flows, and too little to the underlying policies which shape them. If developed countries really want to see large-scale investment in jobs and growth in the developing world, then a good place to start would be for them to open their markets to developing country exports.

While the public circus of meetings and discussions continues, a small but powerful group of officials are closeted away in private session, finalising the text of the Addis Ababa Action Agenda. The remaining disagreements have few immediate implications for people living in poverty, but reflect the courtly dance of international geopolitics. Should the principle of “common but differentiated responsibility” be an overarching principle for the SDGs, or is it limited to the field of environmental protection? Is FFD the last word on the “means of implementation” of the SDGs, or can negotiators push for more substantial commitments in New York? And there is the usual jostling between international organisations for revised mandates: this time, between the OECD and the UN for policy leadership on tax.

Because the Addis Ababa Action Agenda is not a binding agreement, it may seem like pedantry to debate these details to the bitter end. But in the long run they matter, because the language of these communiqués accumulates over time, setting precedents and framing future discussions.

As Addis enters its second day, I’m feeling positive overall about the conference, and what it means for 2015 as an important year for development. These conferences matter because they frame and inspire. Of course it would be nice to have binding commitments and measurable targets, but I’ll take talking about the right thing over having targets for the wrong thing any day.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.