The G20 should start a serious discussion about how innovative financing mechanisms could accelerate global development, but this should not distract from concrete commitments on aid
After years of talking about finding innovative ways to raise money for development – and indeed years of using innovative ways to raise money for development – the issue has well and truly hit the global political agenda. Not only has the Robin Hood tax campaign gained momentum as a result of the financial crisis, but President Nicolas Sarkozy has adopted the issue of innovative finance as one of the priorities for his G20 presidency. He has even brought Bill Gates on board to look at the issue as part of a review of the future of development finance more generally.
Cynics argue that this is simply an attempt by Sarkozy to divert attention away from France's failure to meet its fair share of Europe's aid targets – according to One's latest analysis, France has given less than half of the aid it promised to Africa, even after watering down its target. But we mustn't let this put us off the idea of innovation. It is clear that if we're to have any hope of generating the resources needed to meet the MDGs, especially with the added challenge of the effects of climate change, we're all going to have to get serious about innovative finance.
That is why One, in a break from tradition, has focused so heavily on innovation in raising finance in the 2011 Data Report, published on Monday. In the report, we give an overview of several innovative financing mechanisms, largely focused on the health sector, and present six ideas for consideration by the G20.
These ideas were selected on three main criteria:
• They are both politically and technically feasible for at least a sub-set of G20 countries;
• They do not require the creation of additional institutions or implementing agencies;
• They have the potential to leverage significant amounts of both public and private development finance and can therefore make a substantial contribution toward the achievement of the MDGs.
These mechanisms can raise billions more dollars for critical development projects that are at real risk of being scaled back as a result of the global financial crunch. These range from financial sector levies to African diaspora bonds to IMF gold sales, and creatively catalysing private sector investment in agriculture.
But these are just a few of the options, and that's why we want Sarkozy and the G20 to have a broad-ranging discussion about this issue. This is particularly important because we know there is no "one size fits all" approach – we've seen that some leaders are straining at the leash to press on with a financial transaction tax, while others have made it clear that they wouldn't touch it with a barge poll. These disagreements shouldn't delay the discussions; there are enough options to allow each country to find a way to contribute through innovative financing, and they needn't all be done on an all or nothing multilateral basis.
Aside from the diplomatic argy-bargy, there are real risks. It is vital that the focus on innovative finance does not distract from concrete commitments to increase core aid programmes or from other key development policies. For example, if Sarkozy and his G20 counterparts just bang on about innovative finance, while failing to allocate relatively small sums right now to effective mechanisms such as the Global Alliance for Vaccines and Immunisations (Gavi) or the Global Agriculture and Food Security programme, then all the rhetoric about innovation will be exposed as just grandiose posturing. It is critical that the G20 affirm that any new revenues raised through innovative finance mechanisms will only be counted against future aid targets – like the EU's promise to spend 0.7% of national income on aid – if they meet the Organisation of Economic Cooperation and Development's DAC criteria for overseas development assistance.
Innovation in development finance doesn't preclude innovation in other areas of development policy. In fact, they must go hand in hand. Groups like One have never argued that aid alone is the solution for Africa. It must accompany improvements in governance and policies to boost inclusive sustainable growth. That's why we're pleased Sarkozy is also pushing the G8 and G20 to agree measures on transparency in the extractives sector – something the London stock exchange needs to implement in the same way as the New York stock exchange.
Such measures can help African nations to boost the amount of domestic development finance they can raise from taxes and licenses for the extraction of natural resources. Given all the stress to the poorest through food and fuel price rises and other crises, we will need all the innovation we can get to seize the real opportunities before us to accelerate global development.
Jamie Drummond is the executive director of One, the development charity set up by Bono and Bob Geldof