Nicholas Rosellini: Symposium on Development Financing and Sustainability along the BRI and SSC

Jun 8, 2017

Opening Remarks: Symposium on Development Financing and Sustainability along the BRI and SSC

Distinguished Guests,

Ladies and Gentleman,

It is my great pleasure to welcome all of you today to this symposium on development finance and sustainability hosted by UNDP China. First and foremost, please allow me to express my gratitude to the Climate Partnerships for the Global South led by the UN Secretary General to support this event.

The world has achieved many successes in numerous development areas in the era of the Millennium Development Goals (MDGs). Between 1990 and 2015, over one billion people were lifted out of poverty; poverty incidence dropped from around 50% to 14%. Meanwhile, the global under-five mortality rate has declined by more than half, and primary school net enrolment rate reached 91% in 2015. The remarkable progress brought about by the MDGs agenda has proven that global action works. It paves a promising way to achieve even greater development outcomes in the forthcoming era defined by the Sustainable Development Goals (SDGs).

The 17 SDGs have sketched a blueprint for global development that is human-centered, inclusive, green, balanced and collaborative. This means, social-economic and environmental sustainability are equally important, and wealth shall be fairly distributed to benefit everyone. Decent life is a top priority, entailing not only basic social protection in education, healthcare and welfare, but also decent jobs that maximize the realization of human creativity and self-attainment.

The ambition and scope of the SDGs have placed greater emphasis on the means and effects of implementation to ensure its successful delivery. This, in particular, calls for a stronger global partnership that could ensure concerted efforts in development financing and systematic capacity building. To strengthen international cooperation has several implications.

First, the current global governance system needs to be revisited to to reflect shifts in social-economic trends worldwide since the main multilateral institutions were set up. Second, a wider range of stakeholders, including especially the private sector, need to participate in and take ownership of the SDGs implementation.

On the first note, the world has witnessed an increasing number of upper middle and middle-income countries. Their GDP grew almost 5 times, from $9.5 trillion to $46.5 trillion between 2000 and 2015. Accompanying this trend is the shrinkage of the contribution of high-income countries to the world economy. During the same period, their share of global GDP reduced from 81% to 63%.

These changes have resulted in a changing development finance landscape. First, an expanding range of development finance providers have gained increasing prominence in the level of international cooperation in the past decade. A diverse set of countries across the world are now active in development finance. Second, the portfolio of financial instruments has rapidly expanded. A rough estimate indicates a gross disbursement of $32 billion from emerging providers in terms of official development assistance (ODA) in 2014, accounting for 17% of the global total. The 17%, however, merely represents a small fraction of the international cooperation provided by them. Commercial tools, such as concessional loans, trade financing, export and import credits, are frequently used to support development in developing countries.

The evolving finance mix has, therefore, raised the urgent need for a better understanding of development finance, particularly in the context of south-south cooperation (SSC). This is also what we hope to achieve today through the convening of this symposium. To do so could enable developing countries to access and utilize the increasingly complex array of financing options more effectively, so that different types of finance can be better leveraged and tailor-made to specific development purposes and results.

This leads me to the next point on impact investing. The world is now entering the ‘age of choice, characterized by a plethora of finance providers and finance tools. However, what is different is not only the players and the means to finance development, but more importantly, the new goals to be served – the SDGs.

This is to say, money needs to be spent where is mostly in need to produce development dividends across all pillars of sustainability.

This is certainly not an easy task. The SDGs require an annual investment of $5-$7 trillion per year globally. Developing countries alone require $3.3-$4.5 trillion annually, mainly for basic infrastructure, food security, climate change mitigation and adaptation, as well as health and education.

Undeniably, the need for development finance is enormous. The challenge cannot be solved by one country or region alone. Neither can it be solved by the government alone. The private sector – representing 60% of global GDP and 80% of capital flows –  has a lot to contribute through their activities, investments and innovation to finance and implement the SDGs, as well as help realize impact investing.

Ladies and gentlemen, the changes that are taking place in the world have presented unprecedented opportunities for a new round of international cooperation. A potential accelerator of this revolution is the Belt and Road Initiative (BRI) led by China, aiming to strive for common prosperity through building regional connectivity in infrastructure, policies, trade, finance, investment and culture.

The BRI is expected to further re-shape the global development finance landscape with large financial flows implemented through a more assorted portfolio of financial instruments and modalities. The private sector plays a particularly critical role to identifies impact investing opportunities in host countries and act as an active implementer of the SDGs.

UNDP has been an early supporter of the BRI and was the first international organization to sign an MoU with the Government of China. During the Belt and Road Forum (BRF) this May, UNDP signed a follow-up action plan with the National Development and Reform Commission (NDRC) to specify next steps to implement the BRI. We believe that through the BRI, China has put forward a far-reaching and innovative development cooperation framework, under which finance could be further harnessed from a broader set of channels and made available to support ideas, practices and projects that could have an impact on sustainability. The experiences and lessons learnt during this process are as much valuable and worth widely sharing through the vast development network being established through the BRI to advance SSC.

To this end, I would like to thank you again for participating in today’s symposium. I hope the discussions are fruitful and each of you could find useful take-away messages on development finance.  

Thank you very much!  

 

Closing Remarks: Symposium on Development Financing and Sustainability along the BRI and SSC

Distinguished Guests,

Ladies and Gentleman,

Thank you very much for your participation today at this symposium. I hope you have gained some useful insights on China’s development finance. There are a few take-away messages I would like to talk about.

First, China, like many other emerging providers of international development cooperation, has been deploying a broader and more diversified set of financial instruments to support development. Many of these are commercial and not concessional. But at the same time, they are dedicated to development objectives and infrastructure jobs – the Sustainable Development Goals (SDGs) – in ways that place a greater emphasis on financial sustainability and more importantly, the capacity for domestic generated growth. Both aspects are crucial for developing countries, given their capacity to borrow and manage debt levels.

The importance lies not only in how development finance is provided and its potential development impact including non-monetary contributions. The real added value pertains to the development experience offered by peer groups, which are at similar level of development and whose lessons could serve as more relevant reference points, compared to those derived from the more developed counterparts. This implies that the learning scale is at the same level. This, in essence, defines development finance in the context of south-south cooperation (SSC).

To better utilize this bulk of development finance requires a clearer understanding of what it is and how it works. Today’s discussions serve as a good starting point to help map out these financial flows. Such information is crucial for developing countries to make wise decisions when confronted with the expanding array of financing options made accessible for them to support national development priorities. Yet, the scarcity of comparable data and information available has presented many challenges to portray a complete picture of the international development landscape that is in transition. More research is certainly needed and this is where UNDP attempts to provide support and contribute.

Second, we have heard voices of representatives of a few countries today, regarding their thoughts on development finance, particularly in the SSC context. One of the major concerns is what should be financed to maximize development dividends. It is true that the SDGs have provided a comprehensive framework to guide development. However, how SDGs are interpreted and prioritized is different for different countries given the different level of development. Moreover, not all SDGs are synergistic and there could also be trade-offs that need to be balanced.

These are very valuable to generate tailor-made proposals as to how to better mix financial tools to match development needs and overcome bottlenecks that prevent effective impact investing.

Meanwhile, many investors have shared their views on challenges when they invest. One of the major impediments lies in the lack of bankable projects. This holds particularly true in the infrastructure sector, which often requires mid-to-long-term investment with low rate of returns. What makes it even more challenging is the many types of risks that may emerge and need addressing during project implementation. The good news is that, there are solutions to tackle these challenges. What was frequently proposed is stronger collaboration between the private and the public sector.  Instruments such as guarantees from the public sector could be used more widely to anchor transaction and create greater possibilities to crowd in private funds.

Last but not least, I am very hopeful that investing with development impact is a way for future sustainability. Many good practices have been shared today that have widely broadened the scope of innovative finance solutions for social and environmental sustainability besides economic rewards. We heard today, for instance, the innovative business and finance models pioneered by the private sector that have brought advanced green technology to hundreds and thousands of rural households in China. We also learnt innovative financial instruments, such as the ‘packaged loans’ provided by China Development Bank, which are able to bundle varied projects together for collective financing. However, good practices can only be impactful if they can be scaled-up. This does not equal to simple replication. What needs to be done is to create an enabling context where key factors of success are in place, including but not limited to essential governance capacity.

Ladies and gentlemen, UNDP stands ready to carry this discussion forward and work with partners to better understand development finance and deploy it to achieve positive development outcomes through SSC. I hope that you have found today’s discussion inspiring. Thank you again for your time and valuable contribution  

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