Focusing on financing sustainable development, in India and elsewhere, ORF organised a conference that explored the future of global financial architecture for development and highlighted the difference between financing and implementation.
The United Nations’ third Financing for Development Conference took place this year in Addis Ababa between 13-16 July. The conference included world leaders discussing ways to pay for the ambitious and pricey sustainable development goals (SDGs), including ending poverty for good and achieving food security globally by 2030. The roundtable discussion organised by ORF on 13 August at The Oberoi, New Delhi, was focused on financing sustainable development, not just in India but also elsewhere – specifically in light of the outcomes of the aforementioned FFD conference. It also explored the future of global financial architecture for development and highlighted the difference between financing and implementation (the latter being a broader term) of said finances.
Dr. Urvashi Aneja, Fellow, ORF, chaired the event. She started off the talk by asking multiple questions to the panelists to give the discussion a direction, focusing mostly on the third International Conference on Financing for Development. These included what was left out at the conference, and also how successful the conference was in general. Subsequently, her introduction went on to talk about private investors and finance. “There is a lot of enthusiasm around the idea of private finance. What role can it play? How can public resources help finance? What are the incentives for investors?” she asked. Dr. Aneja ended her opening remarks by questioning the role the new development bank can play in ensuring that the developing nations of the South are able to implement the SDGs.
Dr. Renu Kohli was the first panelist to speak. The crux of her argument was how we can reshape the global financial architecture for development. According to her, India’s framework needed modification to adapt to today’s world. She illustrated her point by discussing how the demand-side deficit from emerging countries has grown to almost $1.5 trillion, whereas the supply side, both public and private, has not kept pace. The argument revolved around how countries, especially India, must focus more on private financial flows and attracting direct investment by incentivising investors, and reducing risk by “…introducing Sovereign guarantees and Asset back securitisation.” She then discussed the importance of the government and the necessity for integration with the government. Dr. Kohli concluded her address by talking of the importance of regional development banks and how smaller and more targeted institutions tend to be more successful than global ones like the World Bank.
Dr. Subir Gokarn, Director-Research at Brookings India, was next on the panel. He began by agreeing with the previous speaker by also suggesting that a definitive framework for development finance was vital, and went on to propose how the broad motivation for the new BRICS Development bank stems from a “collective sense of disenchantment over the Bretton Woods system.” He believed he was optimistic for the future and how banks like this will give developing countries like India a bargaining ability. Dr. Gokarn’s ending remarks focused on the SDGs and how the agenda’s sensibilities differ for the private sector. He illustrated this by explaining the need for the sustainability report that companies must create to be more attractive to investors, and also talked of the Principles of Responsible Investment.
Next in line to address the conference was T.K. Arun of the Economic Times. His overarching argument was a critique to the current economic model in India and he spoke of how the government needs to focus on “tapping capital from around the world” and especially attract money towards development. He talked of how India needs to tap the potential with which Asian markets, as a whole, are growing and shaping global economy.
“Ultimately, people need agency for them to actually develop…One needs political agency.” The reason growth has been relatively stunted in India, in his opinion, is the corruption and aforesaid lack of agency. He went on to discuss how India needs credible local financial mechanisms (stock and bond market) that work with integrity. The speaker finished by addressing India’s weaknesses and perhaps inability to administer what was discussed at the Addis conference, and went on to say how it is difficult for a poor country like India to forget coal (which is abundantly available) in search for alternative energy, and that it needs to identify alternative sources of finance.
Last on the panel was Dr. Vikrom Mathur, Senior Fellow, ORF. He briefly discussed how the failure of Official Development Assistance (ODA) is the biggest issue. He talked of how India needs to send very clear signals on development financing so as to encourage countries to invest. In light of the soon to occur Paris conference, he said that after the outcomes of the meetings that have already taken place in New York and Addis, there is hope of the Paris Conference being even better. Dr. Mathur completed his speech by stating that the global regulatory framework (specifically the global banking norms – Basel III) has made it difficult for the private sector to access long-term finances.
Dr. Aneja concluded the initial section of the discussion by raising a few more questions, such as how development finance is not the same as development itself, and how the new BRICS bank can be a game-changer. She finished by asking if we were too optimistic about the private sector, the role of diaspora bonds, social bonds and impact investment.
What followed was a lively discussion with multiple comments and queries. An audience member mentioned “getting our own house in order in order to get a sense of direction” before the Paris conference, which was followed by another audience member saying that there are about 22 trillion dollars waiting to be invested. “What role can the government play into tapping that capital?” she enquired. In their replies, the panelists spoke of the role of media in this regard, and the idea of aid verses business. Dr. Kohli answered by questioning just how much the government can ensure risk reduction for investors. Subsequently there was talk of there first being political agency and social harmony as a basis for development.
The conference ended with an address by Sunjoy Joshi, Director, ORF. He gave an overarching view of how the world itself has changed with regard to development in recent times, and significantly so after the momentous 2008 financial crisis. His speech highlighted how high public debt levels, coupled with the current turmoil in West Asia (consequences of which can be felt worldwide) make it difficult sometimes to focus on financing development. He stated that when one talks of infrastructure development, it is not really to think that countries today have the leverage the same size as during the industrialisation times. Mr. Joshi concluded the discussion by declaring that “it would be a height of optimism, to elect ambitions which are stated in the SDGs.”
Report prepared by Ujwal Ganguly, Research Intern, ORF, Delhi.