2005 was to be the year of development. There have been some significant advances – particularly on debt relief and funding for vaccines. But overall, 2005 has not lived up to the ambitions that campaigners and some politicians had for it as a year of development. The last significant opportunity in 2005 to make major progress towards reducing world poverty will be the WTO meeting in December. As things stand, 2005 will be remembered as the year that the world recognised that the Millennium Development Goals would not be met, and decided to pass by on the other side.

Introduction

As the Annual Meetings of the IMF and World Bank draw to a close, now is a good time to take stock of the progress that has been made in 2005 on the development agenda. We’ve had the G8 Summit in Gleneagles in July and the United Nations Millennium Review Summit. in September. The big event still to come is the World Trade Organization Ministerial Meeting in December, which will be a decisive meeting on the Doha Development Agenda.

Why is 2005 is an important year for development

Let us remind ourselves why 2005 is an important year for development. This year was chosen for the United Nations Millennium Review Summit. to review of progress towards the Millennium Development Goals, five years after they were agreed by Heads of State in 2000. The timing was chosen so that we can judge if progress has been made, while reviewing progress early enough to redouble efforts if the world was not on track to meet the goals. Furthermore, in December 2005 there will be an important ministerial meeting of the WTO, which is critical to the success of the trade round which began at Doha in 2001 with a commitment to place the needs of developing countries at the heart of trade reform.

By coincidence, the UK hold the rotating Presidency of the G8 (Jan-Dec 2005) and of the EU (Jul-Dec 2005).  This has given the British Government some power to set the agenda at the G8 and in the EU. 2005 also saw the 20th anniversary of the Live Aid concerts which raised money for Ethiopia in 1985, marked by further concerts in July 2005.

This combination of international attention on the Millennium Development Goals and world trade, coupled with the importance attached by the UK Government to advancing a development agenda, created the opportunity for 2005 to be a year in which the world addressed development policies. In the UK, the Make Poverty History campaign raised public awareness; and (with a much slower start) a sister campaign, the One Campaign has begun to raise awareness in the United States.

Tony Blair said in January that he had two objectives for the G8: Africa and Climate Change.

On Africa, the Prime Minister said that his objectives were: (a) a new partnership between African Governments and the rich world; (b) a “big push” increase in aid, for example through agreement to the proposed International Finance Facility; (c) 100% debt relief; (d) more action on HIV, TB and malaria; (e) more open markets and lower production and export subsidies; (f) support for African economic capacity; and (g) better conflict resolution through well-equipped forces. The Commission for Africa published its report on 11 March 2005, calling for a new partnership with Africa, and a very significant commitment of new resources. On climate change, the Prime Minister’s objectives were (a) to set a clear direction towards reduction in greenhouse gas emissions; (b) a package of practical measures, largely focused on technology, efficiency, renewables, and cleaner fossil fuels; and (c) a partnership with emerging markets to enable them to develop as low-carbon economies.

Progress so far

As 2005 draws to a close, with the WTO Ministerial meeting the only remaining significant milestone, we can begin to see how much of this agenda has been achieved.

Items on which there has been progress:

  • Some more aid has been promised
    About $14 billion a year of additional aid has been pledged by 2010 (an increase of about 12% over existing commitments). The Europeans have promised a little under $11 billion a year in additional aid from 2010. Of this, about $9 billion is from Germany and Italy, both of whom have warned that the money may not be available. Japan has promised about an additional $2 billion a year ($10 billion over the next 5 years). Much of that increase double counts the next item, the increase in debt relief (writing off debts is conventionally counted as additional aid.) No additional aid has been promised from the US or Canada. See More Aid? below for details.
  • 100% debt relief agreed for 18 countries, most of which are in Africa.
    The year began with little substantive disagreement on the need for further debt relief. A decision had been delayed by disagreement about whether the World Bank and IMF would be compensated for the loss of debt repayments that would result, or whether there would be a fall in future new lending and aid. The Finance Ministers’ meeting in June appeared to settle this; but was buttressed by a letter from G8 Finance Ministers to Paul Wolfowitz in September which pledged that the World Bank would be compensated “dollar for dollar”. That was sufficient for the smaller European states to back the plan.
  • The International Finance Facility for Immunization
    European Governments have agreed to fund the International Finance Facility for Immunization, which will save 10 million lives by providing $4bn to vaccinate children against childhood diseases.
  • Debt relief for Nigeria
    The Finance Ministers agree to write off $17 billion of Nigeria’s debt, in the biggest single debt write-off deal ever.
  • Explicit acknowledgement climate change is happening,
    There was explicit recognition in the communique from Gleneagles that human activity is contributing to global warming, and that global emissions must slow, peak and then decline, moving the world towards a low-carbon economy. This was the most explicit such commitment from the United States, at least under the current administration.
  • Commitments to improved aid effectiveness
    The Paris Declaration on Aid Effectiveness in March 2005, if implemented, would give substance to many of commitments to improve aid which had been ageed in the 2002 Monterrey Consensus. However, it remains difficult in practice to hold donors to account for the commitments they have given for many years to improve the effectiveness with which they give aid.
  • Consideration of advance market commitments
    The G8 Finance Ministers said that they were attracted in principle to the idea of making advance market commitments to pay for vaccines for diseases such as malaria if they are developed, as a way to create incentives for commercial research and development. They asked the then Italian Finance Minister to make concrete proposals by the end of the year.

Items on which there has been no progress

  • International Finance Facility
    The UK advocates a funding proposal to increase foreign assistance in the short term by securitising the promise of official aid in the future. The US has stopped saying that this is a bad idea, though it still has no intention of taking part. However, there is not yet widespread support for this idea, and the prospects for it being implemented remain slim.
  • Millennium Development Goals
    John Bolton, US Ambassador to the UN, proposed a number of amendments to the draft outcome document for the September summit which would have removed all reference to the Millennium Development Goals. The final document included an endorsement of the MDGs as set out in the Millennium Declaration, though not the specific targets that have been developed to monitor progress towards the goals.
  • Export subsidies
    Despite pressure from the UK, the G8 could not reach agreement on a date by which they would end export subsidies. They could not even agree to set a date on which they would set a date. Even as the G8 leaders were commiting themselves in Gleneagles to reducing trade barriers for developing countries, their representatives were blocking an end to export subsidies at a WTO meeting in Geneva.
  • Quotas and tariffs on developing country exports
    The G8 countries avoided making any commitments on trade, by saying that they should be dealt with through the process of trade negotiations building up to the Hong Kong Ministerial meeting in December. The trade declaration from Gleneagles said only that “We commit to work, in partnership with others and recognising
    Members’ sensitivities, with renewed energy and constructiveness”
    .
  • Measures to reduce global warming
    While Gleneagles was an important step in reaching international recognition that global warming is a problem, no specific additional measures were agreed.

Items on which the position has deteriorated

  • Donors fail to meet three-by-five commitment on HIV/AIDS
    The G8 committed themselves in Gleneagles to move towards “as close to universal access to HIV/AIDS treatments as possible by 2010″ . They were unable to reach agreement on a more specific commitment. In the meantime, at a pledging session in July, donors did not provide enough funding to meet the so-called “three-by-five objective” of providing anti-retroviral drugs to three million AIDS sufferers in developing countries by 2005 because we have not provided enough money.
  • Appointments to international bodies
    There was no competition for the appointment of the new President of the World Bank on the retirement of Jim Wolfenson, even though the decisioncame only a matter of days after a the report of the the Africa Commission report which recommended that: “Appointments of the heads of international institutions should be decided upon by open competition which looks for the best candidates rather than by traditions which limit these appointments by nationality.” The UK Government said that it supported the recommendations of the Africa Commission, but did nothing to get this recommendation implemented.
  • Reform of Security Council
    The UN summit saw a stalemate in the reform of the Security Council, putting on hold the ambitions of developing countries to increase their representation.

More aid?

The Monterrey conference on Finance for Development in 2002 was accompanied by significant commitments of additional funding from the EU (at the Barcelona Council) and the United States (which announced the creation of the Millennium Challenge program to increase aid for a number of countries meeting certain, specified standards for good governance).

The latest simulation by the OECD Donors’ Assistance Committee Secretariat indicates that Official Development Assistance from the main OECD donors will increase by $50 billion from a little under $80 billion in 2004 to approaching $130 billion in 2010. However, little of this increase was the result of progress made during 2005: the bulk of it had been committed in 2002 in the run-up to Monterrey.

The U.S. contribution is based on the assumption that the Millennium Challenge program will reach its target of $5 billion a year, with the remaining spending coming from projected boosts in outlays for a 2003 HIV/AIDS initiative and a recently announced plan to combat malaria. All of that is subject to the annual appropriations process in Congress. The White House confirmed with disarming honesty that the figures included in Gleneagles were simply a reiteration of existing pledges.

The European nations announced on May 24th 2005 that they would increase development assistance to the equivalent of 0.7 percent of their gross domestic product by 2015, with an interim target of 0.56 percent of GDP by 2010. However, the German and Italian governments accompaned the commitment with a warning that their aid spending would depend fiscal conditions. In total, the May 24th commitment, if met in full, would add at most $11 billion a year of aid in 2010 to the amounts announced at the Barcelona Council in 2002. (This calculation assumes that ODA would otherwise have stayed constant as a share of GNI once the previous commitment had been met – see table here for details).

The Japanese government did not make quantified commitments to increase aid in Monterrey. In July 2005, Japan announced an increase in aid of $10 billion over 5 years, which is arguably “new” money. However, it is not yet clear whether this amount simply reflects Japan’s contribution to debt relief, or is additional to that.

By my calculations (table here) about $14 billion (in 2004 dollars) of additional aid per year has been promised by 2010, compared to what was already pledged. This is an increase of about 12%.

Assessment

The UK Government set stretching targets for its twin Presidencies of the G8 and EU at the beginning of the year. The Prime Minister, Tony Blair, and Finance Minister, Gordon Brown, have put considerable effort into securing the support of other countries to their agenda.

I do not join those who criticise the UK Government for failing to reach demanding targets. I commend the UK Government for setting important goals, and giving strong leadership towards achieving those aims. That little progress has been made has been despite, not because of, their efforts.

But equally, I do not join those who say that much has been achieved. So far, 2005 has not been the year of development that seemed in prospect at the beginning of the year, and which public opinion in the UK and elsewhere in Europe has demanded.

At this stage, prospects for the meeting on trade in November do not look good, though some of the apparent differences may be the bluster of negotiations. Without a significant result from the Hong Kong Ministerial, 2005 will rightly be judged a failure for development.

World leaders have been presented with uncontested evidence that the world is not doing enough to meet the 2015 targets that they agreed at the beginning of the Millennium. This year was the opportunity to assess progress and, if necessary, to take measures to get back on track. There is no doubt that additional measures are needed, and there is a broad consensus about what those measures should be. So far, the heads of Government have lacked the will to make the relatively modest commitments to bring the world back on track to meet the goals. Unless they find that will in the coming months, we will fail to meet the MDGS; and we will fail as a result of a grand failure of leadership on their watch.

Owen Barder
September 2005

The texts

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