Partnerships and financing. Issue 16

Number 16MakingItIndustry for Development

for inclusive and sustainablePartnerships and financing

industrial development

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A quarterly magazine.Stimulating, critical andconstructive. A forum fordiscussion and exchangeabout the i ntersection ofindustry and development.

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EditorialBusiness-as-usual is not an option. Climate change, extremeweather, growing resource scarcity and increasing inequality areformidable challenges. A growing world population means we needto produce more goods and services, while using less resources,generating less waste and emitting less pollution.

It is clear that the world must devise and adopt a sustainabledevelopment model and quickly transition to a low-carboneconomy. But how are we going to implement a truly sustainabledevelopment approach on a global scale? And how are we going topay for this great transformation?

In this issue of Making It, our contributors consider thepartnerships and financing necessary to fight global warming, to promote cleaner and resource-efficient production, to addressthe world’s social and environmental challenges in a sustainableand lasting manner. Common themes are the need to forge effective partnerships with the private sector and to harness the full potential of industry’s contribution to the achievement ofsustainable development.

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GLOBAL FORUM6 Letters8 The G-77 at 50: ‘South-Southcooperation still necessary,still real’ – Interview withAmbassador Aliyar LebbeAbdul Azeez 10 Hot topic: Green growth or post-growth? Assessingresponses to the challengesthat lie ahead, André Reichelbelieves it is time for a post-growth strategy

14 Business matters –news and trends

FEATURES16 New bottle, how’s the wine? Sameer Dossaniconsiders how the newBRICS bank could be adifferent, and better, kind of development bank

MakingItIndustryforDevelopment

The designations employed and thepresentation of the material in this magazinedo not imply the expression of any opinionwhatsoever on the part of the Secretariat ofthe United Nations Industrial DevelopmentOrganization (UNIDO) concerning the legalstatus of any country, territory, city or area orof its authorities, or concerning thedelimitation of its frontiers or boundaries, orits economic system or degree ofdevelopment. Designations such as“developed”, “industrialized” and“developing” are intended for statisticalconvenience and do not necessarily express ajudgment about the stage reached by aparticular country or area in the developmentprocess. Mention of firm names orcommercial products does not constitute anendorsement by UNIDO.The opinions, statistical data and estimatescontained in signed articles are theresponsibility of the author(s), includingthose who are UNIDO members of staff, andshould not be considered as reflecting theviews or bearing the endorsement of UNIDO.This document has been produced withoutformal United Nations editing.

Contents

Editor: Charles [email protected] committee:Thouraya Benmokrane, Jean Haas-Makumbi, Sarwar Hobohm (chair),Kazuki Kitaoka, Jo Roetzer-Sweetland,and Ravindra WickremasingheDesign: Smith+Bell, UK –www.smithplusbell.comThanks for assistance to ZHONG XingfeiPrinted by ImprimerieCentrale, Luxembourg, on PEFC-certified paper –http://www.ic.lu To view this publicationonline and to participate indiscussions about industry for development, please visitwww.makingitmagazine.netTo subscribe and receive future issuesof Making It, please send an emailwith your name and address [email protected] It: Industry for Developmentis published by the United NationsIndustrial Development Organization(UNIDO),Vienna International Centre, P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0, Fax: (+43-1) 26926-69E-mail: [email protected] 16, 3rd quarter 2014Copyright © The United NationsIndustrial Development Organization No part of this publication can beused or reproduced without priorpermission from the editorISSN 2076-8508

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20 Where’s the money? AssaadW. Razzouk considers how we are going to finance thetransition to a green economy

KEYNOTE FEATURE22 Engaging with the privatesector in the Post-2015Development Agenda –Philippe Scholtès and TimWall consider the new formsof partnership required toimplement innovativebusiness models that respondto commercial imperatives,while also delivering on thedevelopment front

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34Who is going pay for Africa’spost-2015 developmenttransformation? CharlesAbugre Akelyira outlines a new form of globalpartnership 38 Country feature: Mongolia –Looking to diversify, plusinterview with SanjaasurenOyun, Minister of Environmentand Green Development42 Good business – Profile of Sri Lanka’s Nimali Chipsand Fibre Mill

POLICY BRIEF44 How developing nations canclose climate finance gaps46 Endpiece – Peter Richards on Caribbean plans to forge a united front on elusiveclimate finance

28 From problem to solution:Working with industry for theglobal environment – Naoko Ishiion how the Global EnvironmentFacility is working with theprivate sector to generate results on a global scale32 Industrial development in achanging world –Amid renewedinterest in industrial policy, Erik Solheim considers the roleof development assistance

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LETTERS

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First, protect theenvironmentIn general, what I appreciatemost about Making It is thediversity of extraordinaryinternational stories onindustry and economy. Myfavourite is the story aboutwater-efficient toilets in issue#15, I suppose because I can’tfind an analysis like thisanywhere else. For Europeans,most surprising seemscompany managing directorChen Chunhong's attitudetowards patent protection. Shesays “…if more companieswould employ this water-savingtechnology, it would actuallybring more benefits to theglobal environment as a whole.In this sense, copying our ideais a good thing.” Forget patentprotection in favour ofenvironmental protection!Marvellous! This is how wecould make the world a betterplace. If only the rest of theworld could share this attitudedespite losing an enormousamount of money.�Susanne Berger-Achatz, NewsEditor, Hitradio Ö3, Vienna,Austria

Technology andindustrialdevelopmentThe interview with LI Yong inissue #15 introduces anexcellent mission which is well

outlined by the UNIDODirector General. Technologieswith technical experts canjumpstart the industrializationof underdeveloped anddeveloping countries, withconsequential benefits ofeconomic growth, which helpsto reduce poverty (a crucialmission of UNIDO) throughjob creation. And social upliftcan be a by-product thereof.

Technology can be a criticaltool to sustain industrializationwithout adversely impactingthe environment. For example,energy is a key input toindustrialization, and variousenvironmentally friendlyalternative fuels to coal areprogressively embraced, or atleast being tested, across theglobe. Alignment andwillingness to share knowledgewith less progressive societiescan help us evolve to a betterglobal society across culturesand political boundaries.

While not wanting to minimizethe segmented challenges,setting strategic developmentgoals and developing tactical

The interview with UNIDO DirectorGeneral LI Yong, in issue #15, above,“introduces an excellent mission”.

action plans, which should bealigned, owned by and committedto by both giving and receivingsocieties, may take time butshould be doable. The good thingis – technologies andindustrialization can deliver lotsof stated goals/by-productbenefits – economic and socialgrowths, job creation, povertyminimization, sustainability andenvironmental protection, etc.�Debabrata Saha, Director,International CommercialTechnology and Marketing, AirProducts and Chemicals Inc.,Allentown, USA, LinkedIncomment

GDP and globalwealthA letter in Making It issue #15questioned whether grossdomestic product (GDP) can beadequately used to measurewealth, quoting economists whoadmit GDP does not “capture

the human condition.” I agree. Bizarrely, when a consumer

buys imported goods only asmall fraction of its final sellingprice will appear in the GDP ofthe country where it wasproduced, while the greater partof it appears in the GDP of thecountry where it is consumed.For example, in 2007 the nationwith the highest per capita GDP(in other words, whose citizensare supposedly the mostproductive in the world) wasBermuda. Yet it’s an island taxhaven, home to hedge fundsand reinsurance companies,and doesn’t actually produceany physical commodities.

A couple of thousandkilometres away is anotherisland – the DominicanRepublic – where hundreds ofthousands of employees workin fifty-seven export processingzones, producing shoes andclothing mainly for the USmarket. Yet, that year, its GDPwas just three percent ofBermuda’s when measured inmarket exchange rates,therefore languishing ninety-seven places below Bermuda inthat year’s global league table.

Which country made a greatercontribution to global ‘wealth’that year?�Dizo Kora, by email

BRICS and MINTsIn the short article in issue #14(Can intra-BRICS cooperationadvance amid economicgloom?) Oliver Stuenkel saysthat “things seem to havelargely gone downhill for the

The Global Forum section of Making It is a space for interaction anddiscussion, and we welcome reactions and responses from readers aboutany of the issues raised in the magazine. Letters for publication in Making Itshould be marked ‘For publication’, and sent either by email to:[email protected] or by post to: The Editor, Making It, Room D2142, UNIDO, PO Box 300, 1400 Wien, Austria. (Letters/emails may be edited for reasons of space).

GLOBAL FORUM

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BRICS countries (Brazil, Russia,India, China and South Africa)”and outlined the problemsfacing each of them. Oliver thenwent on to say that “doubts aboutthe utility of the BRICS acronymare misguided”. I disagree.

It was the economist JimO’Neill who came up with theacronym, claiming thesecountries could rival theadvanced economies. Butgrouping them together wasalways a superficial idea.

Now O’Neill has come up witha new acronym – the MINTs – toform an even more tenuousgrouping of Mexico, Indonesia,Nigeria and Turkey. Most ofthese countries remain trappedin the North-South division oflabour of supplying raw

materials to the advancedeconomies. This makes themhighly vulnerable to the ups anddowns of the commoditiesmarkets. When the Chineseboom helped pull commodityprices up, the BRICS and MINTseconomies did well. But nowChina is slowing down andcommodity prices are in retreat.

These labels of BRICS andMINTs help financial marketstarget countries where quickprofits can be made, rather thansustained industrialdevelopment. With the US andEurope in depression,speculative money has rushedinto countries such as Braziland Turkey. But the money isnow beginning to pull out,partly because the US economy

is looking a bit stronger and alsobecause of the problems all the“emerging economies”themselves are struggling with.

Oliver’s article has someinteresting insights into theBRICS countries’ economic andpolitical problems but they seemto be relevant for countries acrossthe South not just those selected.� James Holmes, websitecomment

South-Southcooperation In the main article in issue #12, I think Martin Khor raises animportant point when he saysthat “much has been made ofincreased trade among thecountries of the South, but much

of it consists of intermediatecomponents to be used inassembling goods destined formarkets in the North.”

The fact is that companies inthe North do not ‘compete’ withcompanies in the South; theycompete with other Northerncompanies, especially to see whocan most rapidly and effectivelyoutsource production to lower-wage countries in the South.Much of the import activity inglobal supply chains is in fullyfinished goods. There is fierceSouth-South competitionbetween producers for contractswith Northern-led companies,but hardly any North-South‘competition’ as such.� John Tresadern, websitecomment

For further discussion of theissues raised in Making It, pleasevisit the magazine website atwww.makingitmagazine.net andthe social networking Facebooksite. Readers are encouraged tosurf on over to these sites to joinin the online discussion anddebate about industry fordevelopment.

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GLOBAL FORUM

What do you see as the most importantinternational issues for the G-77 withinthe United Nations system in 2014? The G-77 is the largest intergovernmentalforum of developing countries, if not anintergovernmental organization itself in astructural sense. It gives voice to thecollective concerns and aspirations ofdeveloping countries, which today stand ataround two-thirds of the total UNmembership. It negotiates on vital issueswith other groups, states and partners onbehalf of its members and peoples. It provides leadership on global issues ofconcern or interest to the Group as acollective.

All issues would seem to coalesce into abroader agenda of enormous importancefor both the G-77, as well as the otherpartners, whatever angle one mayapproach them from and, that is, thereview of Millennium Development Goals,and the elaboration of the post-2015Development Agenda and the SustainableDevelopment Goals. All areas that the G-77deals with would fall into this basket inone way or another – whether it is povertyeradication, employment creation,

development cooperation, restructuringinternational financial architecture,market access, climate change, energy,food and water security, or other pressingconcerns relating to the environment andsustainable development.The G-77 is celebrating its 50thanniversary this year. Some see the worldas increasingly divided between rich andpoor within national boundaries, and thusbelieve that the ‘developed’ North and‘developing’ South is an out-datedconcept. After 50 years, is South-Southdevelopment cooperation still relevant?While the argument that there is Northwithin South, or South within North,appears attractive, it is important to discernthe background against which thisargument has forcefully been put forwardfor quite some time now. In my view, in away it serves a section of the North well,since the fall in development assistance tobelow the level agreed cannot be explainedin any other convincing way. It is in thiscontext, in part I think, that the concept ofSouth-South development cooperation hasdeveloped. By which I mean that we, thedeveloping countries, need to help each

other where our strengths lie. This isbecause poverty eradication anddevelopment continue to remain theutmost priorities of all developingcountries. This explains why South-Southcooperation is not just necessary but, in thecircumstances, is a reality. In terms of South-South developmentcooperation, does the G-77 see industrialdevelopment as a priority? In the contextof carbon emissions, industrial pollutionand climate change, and of growingconcerns about resource scarcity, do youthink the countries of the Global Southcan follow the same model of productionand consumption as the countries of theNorth?Poverty eradication and developmentcannot be pursued effectively unless theyare complemented by what many consideris the one of the key drivers ofdevelopment, and that is industrialdevelopment. It is logical that if South-South development cooperation is to bemore meaningful and effective, industrialdevelopment needs to be at the top of ourlist of priorities. Extending this further, ifyou would agree that industrialdevelopment is a priority, the path youtake to pursue it, and all that is associatedwith it, become priorities as well.

Industrial development, like any otherprocess, has its own costs and benefits. We need to take it forward in a prudent,effective, and environmentally friendlymanner, if we are to avoid the downside. We all know that, in as much as it hasyielded benefits, in situations where therewas no judicious regulation or sense ofcontentment, it has contributed tophenomena, including the ones that youhave mentioned. Although suchchallenges are prevalent in a morepronounced manner in countries of theNorth, we in the South cannot becomplacent either. It is in this context thatI appreciate the concept of inclusive and

The G-77 at 50: ‘South-South cooperation stillnecessary, still real’

Interview with Ambassador Aliyar Lebbe Abdul Azeez,Permanent Representative of Sri Lanka to the United NationsIndustrial Development Organization (UNIDO), and co-chairof the Group of 77 (G-77) Vienna Chapter in 2014.


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sustainable industrial development asendorsed by the UNIDO GeneralConference in its Lima Declarationadopted in December 2013.How does the G-77 view UNIDO’s visionfor inclusive and sustainable industrialdevelopment (ISID)?I believe ISID is not just a fast-emergingtrend today. It is in fact necessary andinevitable. It is derived from the veryconcept of inclusive sustainabledevelopment, the intrinsic value of whichwas reaffirmed at the Rio+20 Conference.That it has been brought to bear onindustrial development is only natural.

How to give effect to ISID? And what

mechanism could help best advance itsimplementation? These are crucial issues,and while we cannot shy away fromdiscussing them, it is not practical toexpect all these to be addressed at once.This is where I believe that considerationsof equity and resilience in the overallmatrix of ISID are important. The idea isto have an inclusive platform, whichmeans flexibility and understandingamong all members.

On the other hand, UNIDO needs tocontinue the follow-up on the LimaDeclaration, and this would require ISID-mapping as an internal strategy in order tosee what is the maximum it should seek toachieve out of the process of elaboration ofthe Post-2015 Development Agenda, andwhat is the minimum it can be contentwith. As we in the G-77 have stressed, toimplement ISID, both the UNIDOSecretariat and member states will have towork together. What are some of the ways in which the G-77 can advocate for the inclusion of aSustainable Development Goal (SDG) onindustrialization? In advocating for ISID, the G-77 is animportant platform but, as I stated before, we need to adopt an inclusive approachwhich looks at a larger constituency, ofwhich the G-77 remains at the core.

First, it can be done by continuing to builda consensus on operationalizing ISID, with arealization of its obvious benefits. Second,there should be a multi-layered, multi-setting cooperation, involving theheadquarters of the UN and otherorganizations and agencies. Third, we needto address what I think is a misconception:that industrialization and industrialdevelopment mean the same thing. In myview, although these terms are usedinterchangeably, industrial development isthe more appropriate concept because Ithink it directly relates to, and is derivedfrom, the concept of development.

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Ambassador ALIYARLEBBE ABDUL AZEEZwas the chair of theGroup of 77 (G-77)Vienna Chapter duringthe first half of 2014.The Group wasestablished on 15 June1964 by 77 developingcountries during thefirst session of theUnited NationsConference on Tradeand Development inGeneva. Although themembership hasincreased to 133

countries, the originalname has beenretained because of itshistoric significance.The main focus of theG-77 Vienna Chapter,which is supported bythe United NationsIndustrial DevelopmentOrganization, is thepromotion of technicalcooperation activitiesand internationalcooperation. The G-77Chapter serves all theVienna-based UNorganizations.


HOT TOPIC

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GLOBAL FORUM

In discussions of the future of economicgrowth, ‘business as usual’ is not anoption. The alternative, say many, is ‘greengrowth’: growth that is resource-efficient,low-carbon and socially inclusive. In thisline of thinking, green growth is the key tomanaging climate change, bringing eco-friendly development to emergingeconomies, renewing economic structuresin industrialized nations, and creatingmore jobs to employ a rising population.

Unfortunately, green growth is a myth,or at least an inadequate response to thechallenges that lie ahead, because itignores the social, political and personaldimensions of sustainability. It can nevercut deep enough into the structures of selfand society to secure a solution to thecrises that we face.

In some shape or form, green growth isalready happening. In Germany, forexample, both energy intensity and energyconsumption have declined slightly over

the past 20 years, while GDP has steadilyincreased. But Germany has achieved thislargely by doing away with lots of its ownenergy-intensive industries, andoutsourcing this part of the supply chainto other parts of the planet – most notablyto China. The same is true for the UKeconomy. And that’s the key issue: whathappens to green growth when there’snowhere left to outsource the mostimportant causes of your problems?

The central concept of green growth is‘decoupling’: in other words, how toincrease the efficiency of the economy bydetaching production from its currentheavy use of finite resources. The idea isthat the ‘greener you shop’, the ‘more theearth is saved.’ So, for example, newtechnologies mean that the air coming outof a car at its rear end can be cleaner thanat the front, while fuel is actually saved inthe process of driving.

Examples of ‘relative’ decouplingabound, as in the German and UKeconomies above. However, there’s noevidence that green growth leads to any‘absolute’ decoupling or permanentreduction in ecological impact, whetherthrough lower carbon dioxide emissions,reduced extraction of raw materials, or lessbiodiversity loss. Fuel consumption permiles travelled may be declining in these

Green growth orpost-growth?

economies, but total consumption isgrowing; refrigerators may use lesselectricity, but there are far more of themin use and their combined ecologicalfootprint is increasing. Growth is stillgrowth, even if it is more energy-efficient.In this sense, decoupling is also a myth.

The social and human consequences ofabsolute decoupling are profound, andthat provides a clue to the continuedpopularity of green growth, even though itcan’t deliver on its promises. After all, it’s

Assessing responses to the challenges that lie ahead, AndréReichel believes it is time for plan P – a post-growth strategy.

ANDRÉ REICHEL is aresearch fellow at theEuropean Centre forSustainability Researchat Zeppelin Universityin Germany. Moreinformation about hiswork can be found atwww.andrereichel.de


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growth, and growth exercises a powerfulhold on the imaginations of policymakersacross the world. The appeal of greengrowth is clear: no fundamental change isneeded. Policies can be that little bitgreener. Business models can incorporatemore corporate social responsibility. Butthe underlying structures of unsustainableeconomies and lifestyles remain the same.

The problem – identified by proponentsof an “End to Growth” (Richard Heinberg)or a “Great Disruption” (Paul Gilding) – is

that ecologically, any kind of growthpushes against the limits of a finite planet:the rising economic costs of climatechange and resource extraction (especiallyunconventional gas and oil via hydraulicfracturing and tar sands). Economically,there are clear, diminishing returns togrowth in most industrialized economies.In this sense, post-growth or de-growthbecome the ‘new normal’ of economicactivities – like it or not.

The same is true for productivity gains:

the more efficient a process becomes, themore difficult it is to squeeze out that extraone percent of increased productivity.Mats Larsson even argues that“innovativity” – the ability to innovate newproducts and production processes – hasinbuilt limits. If a product can beproduced at zero cost and in zero time, nomore innovation is possible. Withadvances in information technology, thatpossibility is rapidly becoming visible.

In post-growth or de-growth, the goal �

“The appeal of green growth isclear: no fundamental changeis needed. Policies can be thatlittle bit greener. Businessmodels can incorporate morecorporate social responsibility.But the underlying structuresof unsustainable economiesand lifestyles remain the same.”

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HOT TOPIC

GLOBAL FORUM

is not just to decouple economic activityfrom its ecological impact, but to destroythe connection completely. For example,renewable energy production can supplyenergy at zero variable cost. If theinfrastructure required is also producedwith renewable energy and recycledmaterials, then the ecological impact couldbe zero.

The de-growth movement calls for avoluntary contraction of Northerneconomies via shorter working hours, theredistribution of wealth and income,increased subsistence production andcollaborative consumption, and thepromotion of non-monetary, commons-based economic interaction. Some roomfor economic growth will still be left forSouthern economies to develop until thebulk of the global population moves out ofpoverty.

In this vision, the goal is a ‘steady state’economy, which is both ecologicallysustainable and socially equitable: wherethe physical size of the economy stayswithin the carrying capacity of planetaryboundaries, while at the same timeensuring a fairer distribution of, andaccess to, all natural and social resources.Post-growth is not just an economic goal – it’s the key to the realization of a just society.

The narrative of post-growth does haveits problems. An economy that doesn’tgrow might look rather dull. ‘Steady state’appears to imply a static economy, perhapseven a static society. However, even if theGerman economy, for example, does notgrow, it would still need to produce andsell products and services worth US$3.5trnin purchasing power parity each year inorder to maintain its GDP.

So post-growth doesn’t spell the end ofthe entrepreneurial spirit or of human

creativity or personal development – quitethe opposite. As John Stuart Mill oncenoted:

“[it] is scarcely necessary to remark that astationary condition of capital andpopulation implies no stationary state ofhuman improvement. There would be asmuch scope as ever for all kinds of mentalculture, and moral and social progress; asmuch room for improving the Art ofLiving, and much more likelihood of itsbeing improved, when minds ceased to beengrossed by the art of getting on.”

Are green growth and post-growthincommensurably at odds? Some say “yes.”Ralf Fücks, president of the green politicalthink-tank, Heinrich-Böll-Stiftung, inGermany, argues for renewed optimismabout the possibilities of green growth vianew technologies, new forms of socialinnovation, new taxes on resource use, and‘green’ ordo-liberalism: the Germanapproach to economic questions that sitssomewhere between social liberalism andneoliberalism by emphasizing the role ofgovernment in ensuring that marketactors are able to produce socially andecologically desirable results.

From a post-growth perspective, all ofthese levers are useful, but they leave outcrucial regulatory changes in the financialsector, measures to promote large-scalewealth redistribution, reduced workinghours, and encouragement for commons-based forms of economic activity. Post-growth advocates like Peter A. Victor andTim Jackson focus more on these areasbecause they actively reduce growth ormake economic and social systems lessgrowth-dependent.

In the green growth paradigm, ideasabout sharing and the entire notion of thecollaborative economy are missing. But ifthese social, political and personalinnovations became part of the paradigm,as well as technology, then green growthmight actually be able to deliver on its

promises, so long as it relinquishes thebelief that growth is an end in itself.

However, doing this represents a hugechallenge to the ways in which societiesare currently organized, politics arestructured, and patterns of consumptionand cooperation are internalized inpersonal values and behaviour. The social,personal and political implications of de-growth are enormous, which is one of thereasons why green growth exercises such ahold on the conversation.

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GLOBAL FORUM

For example, reduced working hourswould help to create more time forcommunity and cooperative activities, aswould a guaranteed basic income for all.With that foundation in place, peoplewould be released from the treadmill ofhaving to earn more money to financetheir habits of over-consumption, andsocial security, pensions, and universalhealthcare could be ensured. This wouldalso make social security systems lessdependent on continued economic

growth. These collaborative forms ofeconomic activity rest on thedevelopment of new forms ofentrepreneurialism and alternativemonetary systems, like local or virtualcurrencies, which establish a secondmonetary system alongside fractional-reserve banking.

We might call this new post-growtheconomy a ‘civil economy’, a productiveeconomic system beyond the growthimperative that promotes every kind of

wealth in cities and communities –cultural and human as well as social andeconomic. Taken together, these stepswould change the physical, economic,social and mental infrastructure thatsurrounds us in fundamental ways. Theywill create a new normality in which weuse resources collaboratively, create andlive out values beyond the monetary, fostercloser social ties and community cohesion,and abandon the relentless call ofperpetual economic growth.

“Post-growth doesn’t spell theend of the entrepreneurialspirit or of human creativity orpersonal development – quitethe opposite.”


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� The State of Green Business 2014,an annual assessment of corporatesustainability trends and metrics,paints a mixed picture.

The good news is that the art ofcorporate sustainability continuesto evolve. What’s business as usualtoday was, not that long ago,innovative, even breakthrough:bio-based products, accountingsystems that place a realistic valueon water and carbon, smart supplychains that optimizetransportation, and renewableenergy that isn’t just for show. Thebad news is that for all of theadvancements and achievements,

the public that “sustainability”isn’t just about preservingicebergs, rainforests andcharismatic fauna – it’s also aboutpublic health, community well-being, food security, affordablehousing and alleviating poverty.

� Renewable energy jobs grew by14% to 6.5 million employeesworldwide last year, led by thesolar panel industry, according toa new report from theInternational Renewable EnergyAgency. Employing a total of 2.6 million workers in renewableenergy jobs, China led in hiring in2013, followed by Brazil and theUnited States. The solar industry –spurred by increasingphotovoltaic panel installations inAsia and falling prices – employed2.27 million workers at the end of

trends

BUSINESS MATTERS

when you actually measure year-on-year progress companies aremaking, it’s a disappointing stateof affairs.

The report, produced byGreenBiz.com and Trucost, lookedat the 500 US companies thatmake up Standard & Poor’s Index,and the MSCI World Index,covering more than 1,600companies in 24 developedmarkets. In most cases, progressover the last five years isincremental. In some cases, it’sflat, or even declining.

For example, total greenhousegas emissions among both US and

global market indices remain flat.Intensity, which are emissionsnormalized to economic activity, isalso largely unchanged. For all theefforts companies are making, it’snot leading to progress. It’s notjust carbon. The progress on wateruse, air emissions and solid wasteis minimal, or worse.

But there remain reasons foroptimism, powered by significantshifts in attitudes amongcompanies and their investors andcustomers; the growth oftechnology poised to leapfrogprogress and accelerate change;and a growing recognition among

Speaking at the UNIDOGeneral Conference in Lima inDecember 2013, United NationsSecretary-General, Ban Ki-moon, backed industry to helpthe world address formidablechallenges. Ban said that thepost-2015 development agendawould not be achieved “withouta close partnership with theindustries that promote growthand jobs.”

Ban commended themember states of UNIDO foradopting a new LimaDeclaration, which stresses therelevance of inclusive andsustainable industrialdevelopment as the basis forsustained economic growth.The Lima Declaration, Ban said,“creates the foundation for thecoming decades of UNIDO’simportant work as the centralagency in the United Nationsfor all matters related toindustrialization.”

The Secretary-Generalhighlighted three ways in which

Ban backs industry to deliverUNIDO is especially well-placed to contribute to“steering the human family ona safer, more prosperous andsustainable path”. Firstly, hesaid, the agency can help buildon progress made in reducingpoverty and shape the futureglobal development agenda.

“We will not eradicatepoverty without the industriesthat promote innovation andtechnology transfer. Industrialdevelopment can also be apowerful enabler, powerfulengine, of social developmentby creating opportunities forwomen and young people.”

Second, said Ban, UNIDOand industry can createmomentum for environmentalsustainability.

“Industry needs to take ongreater responsibility forcleaner production andimproved resource efficiency.Industry must protect theplanet’s resources andemphasize sustainable

consumption and production.”The third area where UNIDO

can contribute, Ban said, is inhelping to meet the challenge ofclimate change.

“Climate change is a serious

threat to the development andprosperity of all the nations….Greenhouse gas emissionscontinue to rise. We need toprogress further and safer andfaster.”

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2013, largely concentrated inChina, the report said. The biofuelindustry, with 1.45 millionemployees, and wind energy, with830,000, were the second and thirdlargest employers.

� In a forthcoming report, theInter-American Development Bank(IADB) is calling for industrialpolicies in Latin America. This is awelcome development, writesAndrés Velasco, a formerpresidential candidate and financeminister of Chile, in an article forProject Syndicate.

Velasco’s preview of RethinkingProductive Development: SoundPolicies and Institutions for EconomicTransformation points out that theIADB does not speak of industrialpolicies, and instead uses thepolitically correct phrase

“productive developmentpolicies”. But, he writes, “themessage is clear: in Latin America,the state and public policy shouldhave a role in deciding what getsproduced. A generation ago, thismessage would have beenheretical. Today, it is a matter ofcommon sense.”

The IADB report states, “Thereis now a growing consensusamong policymakers and analystsalike that by putting all industrialpolicy out of bounds, the regionmay have thrown out the babywith the bathwater. More andmore, the question is not put interms of whether to do activeproductive development policiesbut rather how to do them.”

� Migrant entrepreneurs havecreated one in every seven British

companies, according to the firstcomprehensive analysis of officialdata about founder origins.

Almost half a million peoplefrom 155 countries have launchedUnited Kingdom-based businessesthat are currently trading with atleast £1m (US$1.68m) in revenue,according to research by DueDil, aresearch company, and Centre forEntrepreneurs (CFE), a think-tank.Together they are responsible forcreating 14% of British jobs.

Damian Kimmelman, chiefexecutive of DueDil, said theresearch proves “that migrantentrepreneurs are hyper-productive, net contributors to theUK economy.”

“History tells us that the mostproductive states alwaysencourage intellectual andtechnological ferment; that’s

what we’re seeing in Britainright now, and we mustcelebrate it,” addedKimmelman.

The research found thatentrepreneurial activity amongthe migrant community wasnearly double that of UK-bornindividuals: 17.2% hadlaunched their own businesses,compared with 10.4% of thoseborn in the UK.

The largest group of foreign-born founders in the UK areIrish, followed by Indians.Germans are in third place, theresearch found, ahead of USAmerican and Chineseentrepreneurs, in fourth andfifth. Poland is the sixth-biggestsupplier of migrant businessfounders, ahead of France, Italyand Pakistan.

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A transatlantic coalition ofcentre-right figures frompolitics, academia and businesshas come together toreinvigorate environmentaldebate on the right of politics. In February 2014, the London-based ConservativeEnvironment Networkpublished Responsibility andResilience: What the Environmentmeans to Conservatives, withcontributions from ArnoldSchwarzenegger, former NewYork mayor Michael Bloomberg,Paul Polman of Unilever, IanCheshire of Kingfisher, andJames Wolfensohn, ex-presidentof the World Bank, amongstothers. The core themes thatemerged from the report areeconomic resilience andcompetitiveness, the facilitationof competition via openenvironmental markets, andreconnecting with historicdefinitions of Conservatism.

Speaking at the report launchat the UK Houses of Parliament,Ben Goldsmith, Chair of theSteering Committee of theConservative EnvironmentNetwork, said, “This is the mostwide-ranging and ambitiousdoctrine on the environmentever to come from business andthe conservative movement…The bigger message is that onlythe conservative tools ofcompetition and the free marketare powerful enough to deliverthe environmental security andeconomic resilience we need fora stable society.”

Goldsmith continued, “Theeffect is to completely explodethe myths that the environmentbelongs on the left of politics orthat business is not leading onthis issue. Centre-right partiesaround the world must nowmake the running with smart,growth-orientatedenvironmental policies.”

Centre-right tries toreclaim the green agenda

Ban Ki-moonaddressing theUNIDO GeneralConference inLima, Peru,December 2013.

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Sameer Dossaniconsiders how aBRICS bank couldbe a different, andbetter, kind ofdevelopmentbank

Newbottle.How’sthewine?

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At the 2012 Delhi summit of Brazil, Russia, India, Chinaand South Africa (BRICS), the leaders of the five nationsagreed to launch a BRICS development bank. Thefollowing year in Durban, the initiative was given a name:the New Development Bank (NDB). While perhaps notthe most original of monikers, the name does begquestions – how new is the New Development Bank?Whose development are we talking about here? And doesthe world need another multilateral bank?

[Editor's note: With the establishment of the NewDevelopment Bank during the BRICS summit inFortaleza, Brazil, in July 2014, we should get someanswers to these questions soon.]

Do we need a new development bank?The World Bank and its sister institution, theInternational Monetary Fund, established 70 years ago,have lent billions to developing countries. Yet, in theirheyday – in the 1980s and 1990s – these institutions didnot produce results in terms of poverty reduction or evenin terms of increasing economic growth. In almost allregions, inequality skyrocketed during this period. Evennow, with the exception of Latin America, the gapbetween rich and poor continues to grow.

While the World Bank would be quick to point outthat it cannot be blamed for these failures, it is telling thatinstitutions supposedly meant to foster developmenthave, to this day, very few examples of countries that theyhave actually helped to develop.

Part of the failure can be attributed to the triumph ofideology over evidence. “Washington consensus” policies– fiscal and trade liberalization, privatization and budgetausterity – were required of every developing country thatsought international assistance. The results have notbeen pretty. As has been extensively documented, theperiod from 1980-2010 was in part defined by extremelyslow growth globally. Where growth did occur in theNorth, it often turned out to be the result of speculativebubbles. In the South, the only countries to grow werethose that ignored Washington consensus policies –China, Malaysia, Singapore and a few others – and usedstate-backed borrowing and investment to drive anindustrial policy.

In the last decade or so, middle-income countries,including the BRICS, have been investing in – andsometimes giving what we would usually call ‘aid’ to – lessdeveloped countries in Asia, Africa and Latin America.China is by far the biggest player here, but Brazil, Indiaand others are also extending their reach.

What does the increasing role of Southern countriesas agents of ‘development’ in other Southern countriesmean for the world’s poorest and most marginalized? Isthis yet another layer of exploitation, or do these eventspossibly offer a way out of poverty to communities whohave been denied their rights for centuries? Will the NDBhelp countries improve policies and practices or will it bea mechanism whereby rich countries, like China, gainaccess to more resources and markets using the fig leaf ofmultilateralism?

There are no straightforward answers. But before weexplore deeper, we should be clear about what is not onthe table.

Whose development model?Progressives have long critiqued the development modelof the North being exported to the South asenvironmentally and socially exploitative. The focus onGDP growth to the exclusion of other aims (externalities,in economic jargon) is highly problematic, especially incountries that do not yet have strong social andenvironmental regulations. In countries like India, socialmovements have strongly opposed a development modelfocussed on urbanization, infrastructure development,and on expanding market reach, which almostnecessarily entails the destruction of traditional andindigenous communities and lifestyles.

Even in a best-case scenario, initiatives like the NDBare unlikely to challenge any of this – quite the opposite;they are likely to take a GDP-centred, Northern-development-model approach. That is the model thatthese countries are following, with megaprojects like theThree Gorges dam in China, the Jirau dam in Brazil andthe Kudankulam nuclear power plant in India being �


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showcased by their respectivegovernments as developmentsuccesses. But the NDB’s failure tochallenge the lack of environmentaland social protection in thedevelopment model does not meanthat all hope is lost.

While the neoliberalism of the1980s and 90s promoted a worldviewin which growth and a certain model ofdevelopment are ends in themselves, it did noteven deliver the growth and development thatit promised. Amidst recent triumphalism aboutthe achievement of the UN’s MillenniumDevelopment Goals sits a sad truth: progressagainst poverty has been made in only a handfulof countries. Take out China, Brazil and a fewothers, and poverty reduction has a poor trackrecord in the last 30 years. Even GDP growth hasbeen disappointing at the global level (with ahandful of exceptions), and a lot of the growththat has happened has been deeply inequitable– consider Mexico and India for some of theless equitable growth stories.

The failure is not surprising. Neoliberals argue thatcountries should find their comparative advantage tocreate a trade-based strategy to growth – countries shouldexport what they have. However, neoliberalism has neverexplained why the economies of the US and Japan are notdependent on the export of fur and fish, commoditiesthat they were exporting when they began theirdevelopment process.

True proponents of development understand thatindustrial transformation, not comparative advantage, isthe key to the story. Countries like the US and Japan werenot developed as long as their economies were primarilyexporting raw materials – only when the economiesbegan to produce and export manufactured goods couldthey be called developed (or even developing). Theprocess of industrial transformation is something thatthe World Bank and IMF have not supported – in fact theinstitutions have opposed and blocked these policies.

What the BRICS bank could doMight a BRICS bank be different? It is certainlypossible. Many of the BRICS countries (Chinabeing the most obvious example) are goingthrough the process of industrialtransformation themselves, with state supportfor domestic companies a key component ofeconomic policy. And the BRICS countries(unlike the G7 countries who still dominate theWorld Bank and IMF) have no history of tryingto force economic policy down others’ throats.

To be clear, that does not mean that we canexpect better results in terms of human rights or

environmental protection. Early development in the UK,for example, was characterized by high levels of pollutionand worker exploitation at every level. But it was adevelopment process (albeit an awful one) that centredaround the transformation from an agrarian economy toan economy that manufactured goods. The NDB, ifconsistent with BRICS rhetoric so far, should not hinder(and might even support) this process of industrialtransformation.

Many non-governmental organizations (NGOs)critical of proposals for a BRICS bank have pointed to thedecades of struggles to force the World Bank and otherinternational financial institutions to adopt and enforcepolicies to protect vulnerable communities and theenvironment. They point to controversial projects likethe Brazilian-Japanese-Mozambican ProSavana project,which involves the state-owned Brazilian AgriculturalResearch Corporation adapting Brazilian export cropsfor Brazilian agribusinesses to start large-scaleagriculture projects in northern Mozambique, withexport infrastructure paid for by the Japanese aid agency.The critics say it puts Mozambique’s small farmers atrisk, while benefiting Brazilian and Japanesemultinational companies in their production andprocessing of soy, maize, sugar cane and other cash crops.

These criticisms are certainly valid; problems relatedto bilateral financing of projects are likely to reappear inthese multilateral efforts. But it is unlikely that adevelopment bank can be founded in 2015 and not havesome kind of social and environmental protections inplace. What those protections will look like and how theywill be enforced are questions with which NGOs andother stakeholders should be engaged.

Unfortunately, it is not clear how NGOs or other civilsociety actors are meant to engage with this process.

� SAMEER DOSSANI, ActionAidInternational’s advocacy coordinator,has been working on issues of debt,

development, human rights andinternational economic justice for

over a decade, including as directorof the NGO Forum on the Asian

Development Bank, and of 50 YearsIs Enough: US Network for Global

Economic Justice.


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Unlike other developing country formations (notablyIBSA – the grouping that includes BRICS countriesIndia, Brazil and South Africa), there is no formalmechanism for civil society consultation orengagement. Even if this does not change for theBRICS, civil society organizations (CSOs) should bepushing hard to include CSO consultations in thepolicies and programmes of the NDB.

Despite its many potential flaws, the proposal toestablish the NDB should be viewed with cautiousoptimism. The key countries driving the process – Brazil,India and China – are not motivated only by a desire toexpand their political and economic influence. They arealready doing that without an international developmentbank. They are also motivated by a desire for legitimacy,coupled with a desire to compete with (perhaps evenshow up) the G8 countries that did not live up topromises made in 2008-09 to give developing countriesmore say over the IMF, World Bank and otherinternational finance institutions (IFIs). At that time, theBRICS countries and others were promised more sayover the IFIs in exchange for putting in billions whichthe IMF ultimately directed to Europe. The richcountries have yet to live up to their end of the bargain.

The BRICS’ desire to be seen as the promoters of‘genuine’ development gives campaigners an inroad tohelp the BRICS countries define what genuinedevelopment is. If the development discourse were tofocus less on mosquito nets and vitamins (important asthose may be) and more on sustainable economictransformation, industrialization and job creation, wemight all be better off. Both the BRICS and CSOs can bepart of the process.

A bank that is willing to fund policies aimed ateconomic transformation would be a step in the rightdirection. But would it really contribute to developmentand poverty reduction? There are a few things tolook out for on the off-chance that it can meetthis lofty goal.

First, the NDB should lend not just to BRICScountries (which have many other potentialsources of income), but also the world’s poorestcountries.

Secondly, the NDB should not focus on a specificsector, but rather it should fund those projects thatcountries identify as key to their industrialization anddevelopment policies. If that is not feasible – we arealready hearing that there will be sectoral focus oninfrastructure – it should only operate in countries whereinvestment in the niche sector is already part of thenational development strategy.

Thirdly, in addition to financing projects, the NDBshould be building up technical expertise, research anddocumenting various development experiences. Despitethe noble efforts of some, there still is not enoughdocumentation on why and how countries develop. Thereis even less documentation putting that theory intopractice in the context of a particular developing country,and, where that documentation exists, it is usuallycoloured by the political agendas of the World Bank andthe IMF. The NDB should build up a counterweight tothose narratives and work with underdeveloped countrieswhich may request help to develop their own strategies ofeconomic transformation.

A new global architectureIf the NDB is really trying to push in a different direction,it should be cautious about working with the existingIFIs, especially the World Bank and the IMF. While thoseinstitutions are already preparing to greet the NDB as apotential partner, partnership would come with a lot of

baggage for an institution promoting itself as analternative. In order to create such a genuinealternative, it should look elsewhere, perhaps tomore participatory institutions like the Global

Fund for AIDS, Tuberculosis and Malaria.In addition to a more democratic governance

structure, the NDB should ensure thatrepresentatives from recipient countries are alsopart of the process. There are many ways inwhich it could do so – the best might be tocreate a governance mechanism that includesrepresentatives from other structures, such asthe African Union or the Least DevelopedCountries block, as well as members of

Southern civil society.If the NDB can establish governance

structures more equitable, moretransparent, and more tilted towardsensuring that the needs of poorcountries are at the fore, it may add tothe already building pressure formeaningful reform of the BrettonWoods institutions.


Assaad W. Razzouk considershow we are going to finance thetransition to a green economy.

Where’s the money?

ASSAAD W. RAZZOUK is aLebanese-British clean energyentrepreneur, investor andcommentator. He is GroupChief Executive and co-founderof Sindicatum SustainableResources, a global cleanenergy companyheadquartered in Singapore; a board member of theAssociation for Sustainable andResponsible Investment in Asia;and a board member of theClimate Markets andInvestment Association.

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According to the United NationsIntergovernmental Panel on Climate Change,the Earth is set to warm by 4 to 5 degreescompared with pre-industrial levels, warmingthat will wreak devastating effects on theplanet and lead to massive destruction, loss oflife and loss of subsistence for millions. Inorder to avoid this outcome, the InternationalEnergy Agency says we need US$1trn a yearuntil 2050 to finance a transition to greengrowth and green lifestyles.

Where is this US$1trn going to come from?First, based on research by the Climate PolicyInitiative, three-quarters of all climatefinancing already comes from the country itis spent in. We will need (and will have to get)funding from most countries, even very poorones, though that’s not the same thing assaying we need it from their public purse:climate change is a global “commons” andrequires every individual, company, andcountry to participate in its solution.Countries with little capacity to reduceemissions and adapt to climate impacts willnonetheless have a deep-pocketed privatesector which can contribute.

What matters is how the private sectorcan be made a full partner in the fight againstclimate change. The private sector alreadyaccounts for more than 60% of globalclimate finance and if we are to get toUS$1trn in annual climate finance flows, it will have to account for the majority of funding.

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Second, we also know that out of thisUS$1trn, US$100bn or 10% is intended tocome via the Green Climate Fund, a UNinstitution which joins an alphabet soup of international climate support vehicles,including the GEF or Global EnvironmentFacility, the CIFs or Climate InvestmentFunds, the UN climate talks’ “AdaptationFund” and another thirty-fiveorganizations listed as “UN partners onclimate change”. The Green Climate Fundis supposed to facilitate the mobilization ofthe US$1trn annual flow of capital neededfor climate action.

So how do we make the private sector a fullpartner, while getting the Green ClimateFund off the ground?Private sector mobilization isstraightforward: we must continue ourefforts to introduce a carbon price across, at aminimum, all G20 economies. Carbonmarkets represent up to 50% of the solutionin the fight against global warming and acarbon price is critical to mobilize the privatesector (which accounts for 70% of globalGDP and 70% of employment). Domesticcarbon markets are spreading and linking uparound the world, and by 2015 are likely tocover some four billion people. Yet fossil fuelindustry lobbying continues to deliverwatered-down versions of this effectiveinstrument. Green bonds, for example, won’t get off the ground at the scale we needwithout a carbon price (and a rising curve for carbon prices) to help price future cashflows correctly.

Getting the Green Climate Fund off theground with US$100bn in annual spendingpower is just as challenging. For now, theUS$100bn is nowhere to be seen, a symptomof a larger malaise. There are several factorsbehind a social movement’s likelihood tosucceed, and, to date, the climate movementhas spectacularly bungled all of these factors,but none more so than the need to give riseto stabilizing institutions to give itpermanence and efficacy. The track record of

climate funding from UN-relatedinstitutions leads one to despair: betweenthem, these vehicles disbursed a total ofUS$15bn over the past 20 years, an average ofUS$750m per year, a far, far cry fromUS$100bn.

Contrast the current state of internationalclimate funding, in particular the GreenClimate Fund, with the Global Fund to FightAIDS, Tuberculosis and Malaria. The GlobalFund is an international financinginstitution set up in a partnership betweengovernments, civil society, the private sectorand affected communities, by combiningresources towards fighting HIV and AIDS,tuberculosis and malaria through grantprogrammes. Founded in January 2002 inGeneva, just three months later it approvedits first round of grants for 36 countries.Twelve years later, the Global Fund hasdisbursed more than US$23bn, saving 8.7 million lives: emphatic proof that globalco-operation can work and that when it does,it solves global problems.

Why has the climate movement beenunable to give rise to effective institutionsof a size commensurate with the problemwe are trying to tackle? The Green Climate Fund has been a verylong five years in the making and is acting asif it were deserted of common sense: while ithas received a paltry US$40m in pledges sofar, it spent all of it on its administration andon board meetings around the world,

without a thought to approving evensymbolic grants to needy communities anddeserving projects. In typical fashion, in May2014, it declared that it finally agreed on a setof design rules, paving the way for its initialcapital to be raised, and accompanied this“success” by announcing a Frenchcontribution of US$1m (that’s 10% of 1% of1% of US$100bn) to fund its own expenses!

There are a couple of conclusions we canalready draw from the history of climatefunding mechanisms.

First, we need to stop reinventing thewheel with new aid mechanisms. Greaterfragmentation is undermining the fewpublic dollars that are put toward mitigationand adaptation annually. As the Global Fundhas shown, it is easy to raise massiveamounts of funding once the political will isthere. In the case of the climate fundingmechanisms, whether it’s the AdaptationFund, the GEF, the CIFs or the GreenClimate Fund, we know that that financialtransaction taxes for example (well-tested,tiny taxes on certain financial transactions,also known as Robin Hood taxes) could raise US$300bn a year globally. It’s time forthe G20 or the G7 to implement these Robin Hood taxes and, following the lead ofthe Global Fund, voluntary taxes on aviationas well.

Second, it's time for the UNFCCC to bevastly scaled down to an institutionproviding technical input on monitoring,reporting and verification, and accounting ofgreenhouse gas emissions. After 20 years ofarguing that a tonne of CO2 is a tonne ofCO2, it’s now clear that’s not the case. The “tonne is a tonne” mantra is a key reasonbehind the failure of internationalnegotiations, because the effort to reduceemissions in one country is not the same asthat required in another. As we arewitnessing, governments are quite happydeveloping emission-reduction policies andmeasures on their own terms. Recognizingthis fact leads to the conclusion that theUNFCCC’s function should now be greatlyreduced, with much less effort devoted totrying to get countries to agree oncomparable targets and much more effortdevoted to ensuring the integrity ofunderlying climate actions. With soundmonitoring, reporting and verificationprinciples accepted among all governments,there is much greater scope for markets towork to create long-term, rising forwardprice curves against which the private sectorcan invest.

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Philippe Scholtès and Tim Wallconsider the new forms ofpartnership required to implementinnovative business models thatrespond to commercial imperatives,while also delivering on thedevelopment front.

PHILIPPE SCHOLTÈSis Managing Directorof the ProgrammeDevelopment andTechnicalCooperation Divisionat the UnitedNations IndustrialDevelopmentOrganization.

TIM WALL is SeniorPolicy Adviser at theUnited NationsGlobal Compact.

KEYNOTE

ENGAGINGWITHTHE PRIVATESECTOR INTHE POST-2015DEVELOPMENTAGENDA

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.com In the last two decades, increasing economic

growth rates in many developing countries havereshaped the global economy and opened upnew opportunities for learning and enteringinto new activities and sectors. Developingcountries are not only accumulating valuablesources of capital and labour but they are alsoimproving their skills and capacities to innovate.

Such continuous changes in the globaleconomic landscape have been characterized bya shift of wealth towards the East and South,shaping new forms of promoting, as well asfinancing, development. However, leadingtechnology and knowledge towards sustainablegrowth and moving up the value chain is still achallenge for most of the developing world.

Productive business activities are central todevelopment. A strong private sector is a keydriver of local economic growth, knowledge andtechnology generation, job creation and theprovision of fundamental goods and services.Therefore, both developed and developingeconomies are increasingly realizing thenecessity of engaging the private sector as anintegral and dynamic agent of development, inorder to sustainably address the most pressingglobal and national challenges. This is central tocontinuing negotiations for the developmentagenda that is to replace the MillenniumDevelopment Goals (MDGs) beyond 2015.

The problems facing our world today are toomassive and too interconnected for unilateralapproaches. Complex development prioritiesrequire systematic and vibrant globalpartnerships that succeed in connectingfunding and expertise with local resources,implementation capacities and ownership – all essential for advancing towards our shared goals.

The development landscape contains manyaspirational partnerships which fall short ofimplementing their bold objectives of bringingtogether public sector, private sector, and civilsociety entities to improve the lives of peopleliving in poverty. Common pitfalls includemisalignments between the global strategy andthe local execution; a lack of commonmeasurement systems for monitoring andassessing progress; inadequate structures tomanage complexity; inability to create sharedvalue; and insufficient resources to guaranteesustainability.

Despite the collective development discourseabout the essential role of partnerships with theprivate sector in advancing development atmultiple levels, good practices remain elusive;many are ad hoc or rather limited, and often focuson corporate social responsibility andphilanthropy, rather than core business activities.Businesses also usually face obstacles tocontributing to the longer-term sustainability ofany development effort, mainly due to the lack ofan enabling regulatory environment or thenecessary infrastructure that allows them to grow.

Undoubtedly, achieving key outcomes ineconomic development, environmentalsustainability and inclusive growth entailsworking together across sectors and industriesin new and more effective ways. Isolated anddisaggregated efforts frequently fail to generatethe desired results due to partnershipapproaches which are incompatible with thecomplexity of the challenges.

As we reflect upon how to better engage theprivate sector as a key partner for sustainableglobal development beyond 2015, one cannotover-emphasize the need for multi-stakeholderdialogue mobilizing the full resources of theinternational community, if we are to delivermeasurable results on the ground.

How does an ambitious post-2015development agenda create a businesspartnership strategy and structure that works at the global, regional, and local levels?

Meeting this challenge effectively will go along way towards ensuring progress in thecurrent post-2015 negotiations. This entailsidentifying new forms of partnership that putforward innovative business models thatrespond to commercial imperatives, while alsodelivering on the development front.

Whereas private revenue streams fordevelopment are highly sought-after by donors, non-governmental organizations(NGOs) and national governments as a means of mobilizing alternative sources of funding,budget concerns alone are not the mainimperative. When partnerships build on theresources, capabilities and influence of a rangeof stakeholders to tackle complex challenges,they become powerful mechanisms to accelerate development.

Today, transformative development solutionsthrough business exist with the capabilities to �


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have profound impacts on areas including:gender equality, human rights, climate change,agriculture and food, water and corruption. Theprivate sector has been traditionally the driver oftechnology development and innovation,representing a hub for technical progress. It has,moreover, proven to have considerable ability tocombine inventive capacity with access to finance.

But businesses are already engaging indevelopment in a variety of ways – frominitiatives seeking to identify new models ofincorporating responsible behaviour in coreactivities, to more traditional initiatives strivingto leverage business supply chains and theproduction process. One particular area wherethe private sector has played a critical role is increating innovative solutions to climate changeand energy security, which often demand finecoupling between capital and ground-breakingcapability. Creating and engaging in platformsfor dialogue and knowledge sharing with theprivate sector can unlock the potential ofrelevant actors, directly impacting theeffectiveness of partnerships.

The Green Industry Platform’s work to ensuremore sustainable business practices inmanufacturing refers to these initiatives, drivenlargely by large and small companies adjustingtheir business model to deal with today’scomplex and resource-constrained world. Thisglobal multi-stakeholder partnership, launchedby the United Nations Industrial DevelopmentOrganization (UNIDO) and the United NationsEnvironment Programme (UNEP), creates aplatform for businesses, governments,international and civil society organizations towork together, with a view to globallyminimizing the negative environmental impactsof today’s businesses, through scaling up andmainstreaming greening practices throughoutthe global manufacturing and industry process.

In fact, businesses that integrate sustainabilityinto their business models are increasinglyreaping greater opportunities for new markets,innovation, resource efficiency and riskmanagement, while also adding long-term valuein economic, social and environmental terms. Asthey are constantly encountering furtheropportunities associated with development,businesses are progressively more aware of theneed to adapt to the changing global developmentagenda, and thus recognize the value of

partnerships and self-engagement in this context. Moreover, a number of partnerships focus on

helping to shape public policy as well as publicattitudes for improved corporate performance.Respective policy advocacy in climate and energy,as put into practice by the Caring for Climate(C4C) initiative, is another example of leveragingthe private sector’s capacity for innovation totarget pressing global challenges. Launched bythe UN Secretary-General Ban Ki-moon in 2007and jointly convened by the United NationsGlobal Compact, the secretariat of the UnitedNations Framework Convention on ClimateChange and UNEP, C4C offers engagementopportunities to help prevent a climate changecrisis by mobilizing a critical mass of businessleaders to recommend and implement climatechange solutions and policies. The initiative helpscompanies to advance practical solutions, shareexperiences, inform public policy, shape publicattitudes and engage in public-private

partnerships. More than 350 companies from 50 countries, which support the world’s largestbusiness initiative on climate change, areprepared to set goals and publicly discloseemissions as part of their existing disclosurecommitment within the UN Global Compactframework.

Multiple factors explain the accumulatedinterest in supporting convergence betweenbusiness incentives with public policy objectives,and more specifically, in its explicit integrationwith achieving future sustainable developmentgoals. Despite the fact that we all talk about aglobalized world, the private sector is actually avaluable point of contact for reaching localpeople and meeting local needs. On the onehand, business-reorienting practices aroundsystemic development issues can create positiveeconomic, environmental and social spilloversby promoting local development, inter alia,

“Transformative development solutionsthrough business exist with the capabilities tohave profound impacts on areas including:gender equality, human rights, climate change,agriculture and food, water and corruption.”

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creating local infrastructure, generating newsources of income, and empowering differentgroups – particularly the poorest, advancingopen markets and enlarging the possibility forlocal commodities to be exported. On the otherhand, their commercial interests in safeguardingsupply chains, embracing new investmentopportunities, developing new markets targetingthe poor and protecting themselves from futureshocks, are also preserved. These kinds of win-win solutions are what we need to be looking for.As such, this is a pressing opportunity to ensurea deep and central focus on businessengagement within any post-2015 discussions.

National governments are also exploring newways to enter new sectors and develop newactivities in order to accelerate economic growthand strengthen their production apparatus, so asto maintain high and inclusive growth.

Transforming their production structures iscritical to that effect, and in return will empowerthem to overcome context-specific needs.

Investing in transforming and upgradingdomestic production structures is as importantfor developing countries today as the design andimplementation of industrial policies. In orderto better adapt to the world’s changing landscapeand to drive economic and industrial growth as ameans to address poverty and sustainabledevelopment priorities, developing economiesare dedicating considerable efforts to identifyingnew forms of partnerships with domestic andforeign companies to enhance technologytransfer and linkages. They are alsosimultaneously investing in supportinginnovation and the development of small andmedium-sized enterprises (SMEs), with a view to building up domestic production capabilitiesand foster diversification. Building inclusive and sustainable value chains by upgrading andstrengthening the competitiveness of local

producers for their successful inclusion in local,regional and global value chains has proven tosignificantly benefit from the participation ofthese producers in embedded business networksand partnerships.

Non-traditional forms of partnerships are alsonotably populating the internationalcooperation landscape, particularly as thesealternative approaches (e.g. South-South andtriangular cooperation) create new channels formaking available further development resources,both in terms of expertise, knowledge andfunding. Private investment flows from theGlobal South continue to hold the potential tosignificantly leverage the development impact of partnerships.

The success of reaching inclusive andsustainable industrial development calls fordialogue with the private sector to buildcollaborative partnerships, create synergies ininvestments, identify mechanisms to channeland mobilize resources, and improve domesticinstitutional capacities, at the national, regionaland global levels.

Depending on the sector, businesses candeliver both commercial and development goalsthrough their supply chains, their distributionnetworks and the benefits they grant to theiremployees. UNIDO and the UN GlobalCompact’s expertise in industry-relatedknowledge and their track record in fosteringbusiness partnerships offer valuable resources forfacilitating and/or brokering synergies betweenthe public and private sector, thereby enablinginvestment opportunities that are inclusive andsustainable and supporting skills development tostimulate innovation and productivity.

That said, we must continue to encouragepartnerships that seek to scale up interventionsinvolving the private sector core activities ordealing with under-investment in developmentchallenges. Getting the public and private sectorsto work together is in itself a challenge, and theneed for coordination at multiple levels furthercontributes to its complexity. However, thediscussions shaping the post-2015 developmentagenda are reaching a crucial stage, and thus thecase has never been more compelling formutually-reinforcing partnerships, enablingcontributions from a variety of stakeholders toeffect the transformation needed for a moreprosperous and sustainable future.

�

“Developing economies are dedicatingconsiderable efforts to identifying new

forms of partnerships with domesticand foreign companies to enhancetechnology transfer and linkages.”

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Naoko Ishii on how the GlobalEnvironment Facility is workingwith the private sector to generateresults on a global scale.

From problemto solution:Working withindustry for the globalenvironment

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If we break down environmental degradationinto causes, consequences, and solutions, wesee industry represented in each category.Non-renewable energy production, the use ofdangerous persistent organic pollutants,contamination of water resources,overfishing, and clear-cutting of forests areall examples of industrial contributions toglobal environmental degradation. When welook at how rising sea levels driven by climatechange could inundate business-intensivecoastal areas, or how energy price shocksfrom declining non-renewable resourcesdisrupt business output, we see thevulnerability of industry to the consequencesof environmental degradation. And when weconsider the ways in which private enterprisecan contribute to innovative andtransformational approaches to solvingenvironmental problems, we see industryintegrally involved in the solution to theseenvironmental threats.

The next decade will likely see worldpopulation grow by 700 million. Anestimated 50% growth in economic outputwill expand the ranks of middle-classconsumers by as much as one billion people.Feeding this expanding population willrequire new techniques in industrial-scaleagriculture, while meeting the consumptiondemands of a growing middle class will beboth a challenge and an opportunity forindustry. To meet these demands sustainably,we have to place a more accurate value uponnatural assets such as fresh water, clean air,forests, and fisheries.

It is with these challenges in mind that I have developed a four-year plan for theGlobal Environment Facility that emphasizes �

NAOKO ISHII (CEO andChairperson of the GlobalEnvironment Facility)pictured with a GEF bannerat the 2013 Chemicals andWastes Conference ofParties to the BaselConvention. The banner isfilled with signatures ofbeneficiaries of of the GEF’schemicals projects in China,Kenya, Mexico, thePhilippines, and Tanzania.


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a partnership approach to tacklingenvironmental problems, and it is criticalthat the private sector, including industry, bean integral player in that partnership, alongwith international organizations, nations,and civil society. Comprehensiveengagement with industry is a vital part ofthe GEF’s long-term strategic effort,GEF2020, and the next four-year fundingcycle, GEF-6, which got under way in July2014. Only with the participation of theprivate sector can we place an accurate valueon natural capital, and fully incorporate thatvalue into the way decisions are made andprogress is measured. We intend to use theconvening power of the GEF, in concert withour partners, to ensure that all key actors –from local communities to nationalgovernments, the private sector, civil societyorganizations, and indigenous peoples –recognize the part they must play in findingand implementing solutions.

Much of what we do in support ofbettering the global environment involvesinteraction with industry, whether the tunafishery or chemical production plants orappliance manufacturers, or miningconcerns, or agribusinesses. The GEF’sprimary responsibility is to support effortsunder treaties to address climate change,biodiversity, forests, land degradation,desertification, chemical pollutants, andinternational waters. We are also financingprojects under the new Minamata Treaty onMercury, opened for signature in Japan inthe fall of 2013. Our climate changeprogrammes include engagement withproducers of renewable energy systems andenergy-efficient lights and appliances.

Our biodiversity and international watersefforts have engaged the fishing and forestryindustries in collaborative efforts. We haveseen dramatic progress through the work wedo with partner institutions with privateindustry in reducing the use of persistentorganic pollutants. And a key focus of ourland degradation work is to ensure that theagriculture industry, particularly in climate-vulnerable regions, can provide secure foodsupplies for growing populations.

During GEF-6, which has just beenstrongly endorsed with US$4.43bn inpledges from 30 donor countries, we will beimplementing new “Integrated Approaches”to addressing environmental challenges,including a project aimed at addressing theenvironmental pressures created by theglobal trend toward urbanization. TheSustainable Cities Integrated Approach willinvolve GEF engagement with localgovernments, civil society, and privateindustry to identify ways to manage theurbanization trend in a sustainable way.China will be the focus one of the firstSustainable Cities projects. A new WorldBank Group study on China urbanizationemphasizes the importance of addressingthe environmental consequences ofurbanization through the use of market-based tools such as taxes and tradingsystems for carbon, air and water pollution,and energy. GEF will be integrally involvedin developing and supporting thesestrategies.

Local, national, regional, andinternational institutions should work tostrengthen engagement with the privatesector because the private sector has the

capital, institutional knowledge, technicalexpertise, and implementation experience tomake sustainable development a reality.Through a cohesive institutional strategy onprivate sector engagement the world canmagnify its impact by redirecting andincreasing the volume of private investmentflowing toward sustainable activities.

The GEF has developed a number ofongoing initiatives in the industrial sectorgeared toward achieving environmentalbenefits and sustainability.

In China, the GEF has provided funds toreduce the risk involved in large volumeInternational Finance Corporation (IFC) loan-guarantees to help unlock lending for energyefficiency projects from commercial banks inChina. GEF involvement has served as acatalyst resulting in replication of an effectiveenergy efficiency lending model across thecountry. Through the en.lighten program, theGEF is effectively working with private sectorpartners across 55 developing countries toimprove the energy efficiency of public,residential, commercial, and industriallighting. The Global Efficient LightingPartnership Programme, or en.lighten, isenabling participating countries to save acombined US$7.5bn and reduce carbondioxide emissions by 35 metric tons per year.

Through the Global Cleantechprogramme for small and medium-sizedenterprises (SMEs), GEF is helpingentrepreneurs who nurse and hatchinnovative ideas on clean technologies suchas renewable energy, energy efficiency, andwater and waste management, inparticipating countries, namely Armenia,India, Malaysia, Pakistan, South Africa and

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Turkey. The uniqueness of the programmelies in its competition-based approach toidentifying the most promisingentrepreneurs across a country, serving as adriving force to inspire the instincts ofentrepreneurs and resulting in the efficientuse of limited financial resources.Entrepreneurs participating in thecompetition are eligible to receive support,including extensive training and mentoringon business plan development, productdevelopment, and funding strategies.

Targeting industrial parks and economicdevelopment zones enables GEF to supportthe optimal combination of industrialactivities to achieve greater impact in a moreintegrated manner. An eco industrial parks/zone programme in Viet Nam has improvedthe environmental performance of targetedzones by reducing emissions of harmfulchemicals, improving energy efficiency, andreducing greenhouse gas emissions throughinvestments in clean, low-carbon technologyin the parks, and improving water usage andreducing pollutants into surrounding waterbodies. Private companies in the zones will bemobilized to actively participate in theproject activities.

GEF plans to replicate a successful projectthat addressed conflicting demands for freshwater in the Hai River Basin of China, which includes the capital, Beijing, and the country’s fastest-growing city, Tianjin. The GEF and World Bank have supported key investments in satellite technologies toreduce the use of water for irrigation and inpractical sewage treatment options forsmaller cities. The result has been sharplyreduced nitrogen pollution and sharply

increased increase in income for farmersusing new techniques that have increasedyields while reducing water consumption.

A GEF-supported UNIDO TESTapproach engaged a number of countriesaround the Mediterranean and aimed tobuild national capacities by conducting pilotprojects within priority industrial areasaffecting the Mediterranean basin. Theproject, funded by the GEF, Italy, and theprivate sector, demonstrates resourceefficiency and enhanced environmental andeconomic performance. The approachtargeted 43 industries in seven industrialsectors, resulting in a range ofimprovements including:� Increased resource efficiency and cleanerproduction.� Eco-design of products.�The introduction of improvedmanagement systems, includingenvironmental management accounting andthe adoption of the CSR approach.�And increased recycling rates and reuse ofwastewater.

The project delivered approximately 1,000man-days of training, yielding savings of US$17m, 9.7 million cubic metres of water,and 263 gigawatt-hours per year. The projectultimately leveraged US$20m in privatesector investment for cleaner technology forparticipating companies. This approach hasbeen replicated in a number of freshwater

basins and large marine ecosystems aroundthe globe.

Reducing the discharge of toxic substancesis an essential element of river basinmanagement. In Slovenia, GEF helped createan innovative environmental credit facility toreduce the discharges of nutrients and toxicsubstances into the Danube River Basin,helping Slovenia meet European Unionstandards. The initiative supports industrialcompanies, livestock farms, and smallmunicipalities that are planning to undertakeinvestments to reduce water pollutants. InSlovenia, the GEF worked with the EuropeanBank for Reconstruction and Development totest the use of financial intermediaries inlending to small and medium enterprises.The US$57.8m framework credit facility waschannelled through local banks to provideloans to private sector companies and smallermunicipalities for investment projects toreduce water pollution.

If we are successful in our engagementwith the private sector, we will bring about animportant transition in the green movement,from one in which private industry was seenas a major cause of environmentaldegradation to one in which the private sectoris a critical contributor to protecting theenvironment and achieving sustainablegrowth. As CEO of one of the most importantinternational investors in efforts to better theglobal environment, I am convinced that theGEF is on the right track in seekingpartnership with the private sector in ourendeavours. Only this way can we leveragescarce public resources with privateinvestment and entrepreneurial know-how togenerate results on a global scale.

A man looks overthe world’s biggestroof-based solarsystem in thesouthern German

town of Buerstadt.The 40,000 squaremetre installationproduces 4,500,000kilowatts per year.

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Amid renewed interest in industrial policy, Erik Solheimconsiders the role of development assistance.

Industrial development in a changing world

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ERIK SOLHEIM is Chair of the Organization forEconomic Cooperation and Development (OECD)Development Assistance Committee. Previously,from 2007 to 2012, he held the combined portfolioof Norway’s Minister of the Environment andInternational Development.

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The world has seen tremendousimprovements over the past decades andindustrial development has been a strongforce for global development. Billions ofpeople and entire countries have beenbrought out of poverty.

Chinese manufacturing increased from3.5% of world total in 1990 to 20% today. It isnot a coincidence that China has become theworld’s biggest producer and brought 600million people out of poverty in the sameperiod.

Fifty years ago, the Republic of Korea wasone of the poorest countries on the planet.Through industrialization, aided by goodgovernment policies, it became one of themost technologically advanced societies onEarth. Think of Samsung, the global marketleader in phones, or Hyundai, one of theworld’s most valuable brands. They have evenbrought us the all-time YouTube hit,Gangnam Style.

From the African continent, Ethiopia hasset itself an ambitious target of becoming amiddle-income country without increasingits carbon emissions. The plan is to increaseagricultural productivity, strengthen theindustrial base and produce green energy.Ethiopia recently opened Ashegoda WindFarm, the largest in Africa. Economic growthhas been above 10% over the past decade.

If governments frame the markets in theright way, industrialization can help groweconomies, fight poverty and combat climatechange. Successful industrial developmentrequires good leadership, the right policiesand sufficient investments.

Countries have to be in charge of theirown development and industrialization.Governments should set the directions andprovide the right incentives for the privatesector. As Norway’s Minister for Environmentand International Development, I rememberreceiving Ethiopian Prime Minister, MelesZenawi. I invited him to speak to ourindustrialists. “We need you”, he said. “Weneed your capital, your knowledge, yourexperience. But these are our priorities! If youcannot align with Ethiopian policies, thereare plenty of opportunities elsewhere inAfrica.” All the businesspeople told me thatthey liked this straight talk. Clarity andpredictability is important when businessesinvest. Countries are different and there canbe many paths to development. Korea,Singapore and China have followed differentmodels. But all have had strong government

incentives to encourage the development ofindustry. National leadership is key.Companies should align behind thepriorities of the host government, but alsodemand leadership and strategic directionfrom governments.

Choosing the right policies makes all thedifference. The Chinese, Brazilian, Turkish orEthiopian success stories are mainly aboutreplacing bad policies with good. The rise ofthe South has renewed the interest inindustrial policies. Industrial policies indeveloping countries are either designed toincrease competiveness of existingcompanies or support the creation of newsectors. Many countries are exploring clustersupport to increase the competitiveness ofexisting sectors. For example, the RwandaDevelopment Board has identified six ITclusters, from cloud computing to appdevelopment, with the aim of turningRwanda into a knowledge-based economysimilar to that of Singapore. Last year, a dealwas concluded with Korea Telekom toprovide access to 4G internet across Rwanda!

Developing countries are also exploringways to enter new sectors. Setting upinvestment funds and development boardsare effective policies. Public procurement canalso create market demand and fosterinnovation. Companies tend to embrace newchallenges when there are money andcontracts to bid for. Companies need skilledworkers and skills helps countries move upthe global value chain. In spite ofimprovements, access to a skilled workforceis of major concern. In Latin America, theMiddle East and North Africa, more than 35%of businesses identify inadequately skilledworkforces as a major constraint to theiroperations.

China was among the top five countriesfor trademark registration in 2010, but thecapacity for innovation has a way to go inmany developing countries. Korea and Japanspend more than 3% of GDP on research anddevelopment, while developing countriesoften spend less than 1% of GDP. However,South-South trade and investment areintroducing new forms of technologytransfers. In Africa, China has beenparticularly active in infrastructure, Brazil inagribusiness and India in generic drugs. Weincreasingly see that Chinese and Turkishclothing manufacturers are relocating toAfrica looking for lower production costs.This represents a great opportunity for Africato embrace manufacturing.

The renewed interest in industrial policy

poses new opportunities for policymakersand industry alike. More information onthis is available in the Organization forEconomic Cooperation and Development(OECD) report, Perspectives on GlobalDevelopment 2013 – Industrial Policies in aChanging World. The report presents anumber of emerging issues in thedevelopment debate and highlights newpolicy trends in developing countries.

There are about 1 billion people in theworld with no access to roads, 1.5 billionwithout electricity, and still many withoutaccess to the internet. Buildinginfrastructure and creating jobs indeveloping countries will require largeamounts of money. Most of it will comefrom the private sector and domesticresources, but development assistance canplay an important role. Developmentassistance can work as a risk alleviationtool to mobilize private resources.

A loan guarantee for a hydropowerplant can bring huge benefits withoutcosting the guarantor a penny. Today, adevelopment finance tool such as aguarantee would not be considereddevelopment assistance unless the projectfails. Success should be encouraged. TheOECD Development AssistanceCommittee is currently working onmodernizing the way in which we measureand monitor development assistance toencourage more development flows. Wemust have a system that allows forinnovation and does much better atleveraging additional money out of theprivate sector. One way to do this is to havebroader, transparent measures ofdevelopment finance from theperspectives of both what effort the donoris making and what the benefit is to therecipient. The Development AssistanceCommittee will be working on thesemeasures through 2014 with inputs frompartner countries, the private sector andcivil society.

I look forward to working with UnitedNations Industrial DevelopmentOrganization and the truly inspiringDirector General LI Yong to figure out howwe can use development assistance tomobilize more resources forindustrialization.

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Charles Abugre Akelyira outlines anew form of global partnership inwhich Africans can drive the post-2015development agenda for themselves

FINANCING AFRICA’S POST-2015 DEVELOPMENTTRANSFORMATION

Unlike the Millennium Development Goals(MDGs) that were literally imposed as part ofthe aid compact, African governments,organized under the African Union (AU),have been proactive in fronting theirpriorities for a post-2015 developmentagenda. The Common African Position (CAP)agreed by heads of state and government inJanuary 2014, proposes six priority pillars forthe new development agenda. These are: � structural economic transformation andinclusive growth that provides employment,food self-sufficiency and addressesinequalities; � science, technology and innovation todrive economic progress; � people-centred development that aims atzero extreme poverty, addresses inequalities,and provides equitable access to basic socialservices, while underpinned by goodgovernance; � environmental sustainability including,responding to climate change; � peace and security achieved throughconflict prevention and tackling the root-causes; � finance and international partnerships,emphasizing domestic resourcesmobilization and rooted in principles ofsolidarity and mutual interests.

The scale of the resources needed Although African governments have not yetestimated the scale of resources needed toachieve the post-2015 goals as outlined in theCAP, undoubtedly these will be extensive.Sectoral estimates generated by the UnitedNations suggest additional financing needsfor developing countries in excess of

US$1trn annually. To finance Africa’s cross-border infrastructure needs (energy, water,telecommunications and transportation)alone,the Programme of InfrastructureDevelopment in Africa (PIDA) estimates aminimum of US$360bn. Add otherinfrastructure needs for rural developmentand public service delivery, and theinvestments needs could rise to US$100bnannually. Add the cost of human resources,social protection, and adaptation to climatechange, and we are looking at US$1trnannually. Factor in outflows and the netresources would be even bigger.

Such volumes of resources cannot berealistically met by external capital inflowsalone. This accounts for the CAP’s emphasison economic transformation as the keydriver of growth, savings, investment andtaxation.

Structural transformation Even though Africa’s GDP has expanded,multiplying nearly five-fold compared to2000 figures, amounting to about US$2trn,due to economic growth and the re-basing ofGDP calculations, this is still smaller than

the United Kingdom’s economy. With asavings rate of about 17%, the volume ofresources that can be derived forinvestments plus debt servicing is less thanthe GDP of South Africa.

The logic for prioritizing structuraleconomic transformation in the CAP is thatsustainable development financing isultimately based on a capable economy fromwhich healthy savings, investments,consumption and tax revenues are derivedto fuel growth, deliver services and reduceinequalities. In Africa, this will requirealtering the structure of economies toreduce dependency on primarycommodities, increase the share ofmanufacturing in GDP, and increaseproductivity in small-scale agriculture and value-added services.

The structural transformation agenda alsohopes to alleviate the enduring impacts ofthe roughly 1,000 Structural AdjustmentProgrammes (SAPs) imposed on thecontinent, which prioritized among others,the export of raw materials, and a slim statethat plays no active role in the productivesectors of the economy and saves money �


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for debt-servicing. SAPs accelerated de-industrialization and the crisis ofproduction, leading to an overwhelmingdependence on international developmentassistance, much of which was channelledinto debt servicing and consumer imports.Whilst the MDGs sought to ameliorate theincrease in extreme poverty, theynevertheless retained the essential elements of this model of development.

Prioritizing domestic resourcesThe CAP prioritizes domestic resourcesmobilization, focusing on three sources;aggregate savings derived from per capitaincome growth; taxation; and domestic debt(e.g. local currency bonds). Although lessprofiled, public expenditure deficitfinancing is especially critical for counter-cyclical purposes.

Tax is already the biggest source of publicfinance in developing countries and is alsocritical for building accountabledemocracies; for redistribution to reduceinequalities; and, for creating incentives forindustrialization and green economies.African governments already raise over tentimes more revenue through taxation thanaid. Even if only the “low-hanging fruit” areaddressed, the result would be enormous.

As Official Development Assistance (ODA)declines and and Foreign Direct Investment(FDI) becomes increasingly volatile andconcentrated, taxation will become evenmore important for the provision of servicesand public investments. If all Africancountries raised just 15% of GDP in revenue,there would be an additional US$200bn attheir disposal annually – which more thanmeets the critical infrastructure needs. Thekey challenge is to take steps to increase thetax-to-GDP ratio.

In an ideal scenario, and given the CAP’sconcern to reduce inequalities, countrieswould increase their domestic revenuesthrough progressive taxes that have little orno impact on the poorest and significantimpact on the richest. Special attentionshould be paid to the gendered impact of taxreforms: avoiding a gender-neutral fiscalsystem and redistributing income frommen to women to compensate for theopposite effect in the economy and society atlarge. However, few African countries havethe capacity to conduct the distributionalanalyses of tax reforms (by income group orgender), and this would be a worthwhile areato invest in to help achieve effectivemonitoring of equality and equity.

International dimension of domestic taxationDomestic tax space is affected both byadministrative capacity and the distributionof global taxing rights. Due to less diverse taxbases, developing countries, including thosein Africa, are more dependent on corporatetaxes than those derived from personalincomes (except payroll taxes). Tax avoidance,illicit capital flight and tax incentives are allfactors that disproportionately constraindeveloping countries’ current revenues.

Across the globe, the majority ofcorporation tax revenues come frommultinational companies. The division ofthese companies’ tax bases is determined bynational policy and administration, and bytax treaties, all influenced by internationaltax rules, in particular the UN and OECDmodel tax treaties and the OECD transferpricing guidelines.

Yet international rules are not politicallyneutral – with implications for thedistribution of taxing rights betweendifferent groups of countries. Acommitment to shift the distribution oftaxing rights over multinationals towardsdeveloping countries would provide Africancountries with a sustainable increase inrevenues, while boosting the benefits frominward investment.

Illicit financial flows, taxation and financing post-2015Illicit money refers to money that isillegally, illegitimately and unethicallyearned, transferred or used. Some of theseflows are obvious – earnings from illegaland criminal activities and launderedacross borders.

Estimates of the magnitude of these illicitfinancial flows (IFF) from developingcountries vary enormously because of theirhidden nature. Annual losses in recentyears from Africa range as high asUS$100bn, with the long-term averageexceeding 10% of recorded GDP. Evenallowing for substantial uncertainty, thisorder of magnitude is dramatic. Moreover,when we compare exposure in relation toGDP, sub-Saharan Africa (SSA) emerges asthe most exposed region to IFF, and this isrelated to exposure to commodity trade,FDI and short-term capital. On average, in2002-2011, SSA saw outflows of 5.7%compared to a below 4% average for allother developing countries.

The bulk of the losses from commercialactivities emanate from fraudulent tradepricing, estimated by the Global FinancialIntegrity to have channelled over US$60bnillegally out of five African countries alone –Ghana, Kenya, Mozambique, Tanzania andUganda. The tax loss from this aloneamounts potentially to 12.7% of Uganda’stotal government revenue, followed byGhana (11.0%), Mozambique (10.4%), Kenya(8.3%), and Tanzania (7.4%).

Curbing these outflows is critical forAfrica’s financing needs. Action is requiredat three levels – national, regional and global– and involves curtailing the anonymity ofthe beneficiary ownership of companies,trust entities and foundations; requiringautomatic exchange of financialinformation for tax purposes amongcountries; and requiring multinationalcompanies to report their profits where theyare made on a country-by-country basis.Transparency is the key to curtailing IFF.

“The logic for prioritizingstructural economictransformation is thatsustainable developmentfinancing is ultimatelybased on a capable economyfrom which healthy savings,investments, consumptionand tax revenues arederived.”

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Transforming FDI and managing ODAIn 2010, FDI overtook ODA as the primarysource of international capital into Africa, butit is concentrated in a few countries andsectors (mainly natural resources,telecommunications and finance). FDI exertsgreater impact on development if it expandsproductive capacity, enhances sectorallinkages, transfers technology andcomplements domestic resourcesmobilization by reigning in tax evasion/avoidance.

In the natural resources sector, benefits aremaximized with enhanced cross-sectorallinkages and higher shares of natural resourcerents. The African Mining Vision seeks toensure that the minerals sector serves Africa’stransformation agenda. It needs to behighlighted and implemented as a core partof Africa’s post-2015 financing strategy.

ODA will continue to have a critical role inplacing Africa’s growth on a sustainable pathand still falls far short of pledges and the 0.7%target. ODA is particularly critical forcountries with less than US$500 income percapita, including those emerging from violentconflicts and where revenue mobilization ischallenging.

In the 2002 Monterrey Consensus onFinancing for Development, leaderscommitted to a “substantial increase inofficial development assistance [to help]developing countries achieve internationallyagreed development goals and objectives”.However, although ODA has increasedsteadily since the introduction of the MDGs,rising from US$58bn in 2000 to a projectedUS$125bn in 2010, it falls short of the 0.7%promises.

To enhance beneficial ODA impacts, theParis, Accra and Busan Principles on AidEffectiveness should be observed to makeODA predictable and reliable, aligned withrecipients’ national development priorities,and with better coordinated donor aiddelivery modalities. It should also address thedonor political economy conundrum: thetension between ‘instant results’ and buildingresilient systems.

Managing remittancesThe value of financial remittances fromAfrican migrants abroad has grownsignificantly and now exceeds ODA. Thepotential to manage remittances for structuraltransformation is immense. Ethiopia’sdiaspora bond has succeeded in attractinghundreds of millions of dollars for theconstruction of the millennium dam project,

signalling an untapped potential. Thisinforms the decision by the AU heads of Stateand Government to establish an AfricanInstitute for Remittances to study, monitorand develop incentives and investmentproducts to harness the development impactsof remittances. The cost of sendingremittances to Africa is however higher thanthe average for other developing countriesand should be addressed as part of the globalpartnership for development.

Innovative Sources of FinanceInnovative financing mechanisms have beenat the forefront of discussions on sustainabledevelopment financing. In order to raiseadequate resources to finance the ODAcommitments arising from the G8 GleneaglesSummit in 2005, former Prime MinisterGordon Brown, proposed the InternationalFinancing Facility, a government bond aimed

at raising resources from the capital marketsin order to finance the front-loading of aid.The Facility did not fly because rich countrieswould not take the risk. Other proposedmechanisms such as international airlinetaxes, taxes on fertilizers, lotteries, oil and fats,advanced market mechanisms for financingrisks related to market failures, carbontrading, the financial transaction tax (the so-called ‘Robin Hood tax’) etc. are yet to prove asignificant source of resources globally or inAfrica. Notably these mechanisms are mainlytax-based. Clearly, curbing tax evasion andaggressive tax dodging globally is a necessarycondition for the success of innovativefinancing strategies.

Pension fundsPension funds are by far the largest source oflong-term savings. Properly managed in thecontext of well-designed economictransformation strategies, they can catalyzelong-term and strategic investments. Pensionfunds are at the centre of the PIDAinfrastructure initiative, with Kenya andGhana committing US$5bn and US$2bn oftheir pension funds respectively. Badlymanaged, through poorly conceived projectsand unreasonable returns to foreign capital,these funds could be endangered. Greaterpublic accountability is indispensable to theintegrity and sustainability of such initiatives.

For financing and global partnerships toaddress Africa’s long term needs, it isimperative that they be guided by suchprinciples as robust analysis of financingneeds; policy coherence and space; long-termstable financing; developmental and justiceprinciples; and domestic resourcemobilization, among others.

Addressing global systemic constraintsAs noted earlier, Africa is highly integratedinto the global economy but as a primarycommodities exporter. Its social andeconomic conditions are highly sensitive toexternal macroeconomic conditions thataffect the flow of capital, commodity pricesand policy space for economictransformation. Its ability to finance itsdevelopment therefore rests heavily on theglobal financial and trading systems as well asthe external macroeconomic environmentwhich lie outside its control. Therefore, theissue of how the international community canbest support the financing of Africa’sdevelopment requires not only an increase indirect transfers but systemic reforms to createthe necessary conducive environment.

CHARLES ABUGRE AKELYIRA is adevelopment economist who has worked as a researcher and lecturer, and as an NGOactivist and development professional inseveral parts of the world. He is currently theAfrica regional director for the United NationsMillennium Campaign, based in Nairobi,Kenya.

The above article draws on the report,Structural Transformation and the Challenge ofFinancing Africa’s post-2015 DevelopmentAgenda, co-written with Atieno Ndomo. The report is a synthesis of a February 2013forum in Johannesburg where Africanthinkers, parliamentarians and civil societyorganizations met to develop a sharednarrative of what the post-2015 developmentagenda should look like in an African context.


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Mongolia’s economy is booming. Driven by the exploitation of its vast mineralresources, the country’s gross domesticproduct (GDP) has grown on average bymore than 9% in the last decade. In 2012,the economy expanded by 12.5%. However,despite this success, analysts agree that thecurrent economic model is not sustainable.

The World Economic Forum’s Kristel vander Elst believes that “Mongolia’s long-term economic success dependssignificantly on how well it is able todevelop its mining industry and manage its revenues, but also on its ability todiversify and build trade and investmentrelationships with its neighbours.”

Mongolia has vast natural resources ofcopper, gold, uranium and coal. In a recentarticle in The Atlantic, Max Fisher wrote,“With China’s increasingly insatiableappetite for exactly the minerals that itsnorthern neighbour boasts in abundance,Mongolia is joining a small class of once-impoverished Asian nations that are gettingrich by selling to Beijing. The problem is thatMongolia’s wealth is not sustainable. If theChinese economy takes a sudden downturn,as it might, the Mongolian economy couldshut down almost overnight. Even if that

doesn’t happen, there’s no question that oneday, maybe in 50 years or maybe in 20, thecoal mines will empty.”

In its latest report, the InternationalMonetary Fund states, “In view of theuncertain external environment, Mongolianeeds to change course to reduce itsvulnerability to external shocks.” For its part,the World Bank states that it wants to helpMongolia “build a sustained and diversifiedbasis for economic growth and employmentin urban and rural areas”.

Social and environmental costsMeanwhile, the United Nations DevelopmentProgramme (UNDP) warns that the rise of theMongolian economy has come at the cost of

the social and environmental dimensions ofsustainable development. Approximately 30%of the population still lives below the povertyline, and the UNDP notes, “There is a growingdisparity in income and this has given rise tovarious elements of social unrest, includingincreased alcoholism, domestic violence andunfettered migration to urban centres.”

Mongolia’s population of three millionpeople is spread over a vast territory of 1.5msquare kilometres, two and a half times thesize of France. About 40% live in the capitalUlaanbaatar, which continues to absorb a hugeinflux of migrants from the countryside. A quarter of the population is composed ofherders who lead a nomadic existence.

The UNDP states that Mongolianproduction processes and practices involvehigh energy-intensity and raw materialsextraction but that energy-efficiencymechanisms and modern productiontechnologies are rarely available in the miningsector. The result is that large amounts ofwaste and pollutants are being generated andreleased into a once pristine environment.Greenhouse gas emissions and atmosphericparticulate matter in urban areas are such thatthe annual average particulate matterconcentrations are 14 times higher than WorldHealth Organization’s recommended level.

ScenariosA World Economic Forum report published inearly 2014 offers advice on the strategicdecisions the government needs to take inorder to guide the country towards long-termsustainable and diversified growth. A numberof scenarios for Mongolia’s future economicdevelopment are presented.

One envisages a future where Chinabecomes a world leader in green technologyand the circular economy, thus opening upnew opportunities for Mongolia to diversify

Lookingtodiversify

MongoliaCOUNTRYFEATURE

Head of state: Tsakhiagiin Elbegdorj hasbeen President of Mongolia since 2009Government: The Democratic Party wonthe largest number of parliamentaryseats in the June 2012general electionbut fell short of a majority and formed anew ruling coalition with a number ofsmaller partiesPopulation: 2.84m (2012, AsianDevelopment Bank estimate)Percentage of the total population livingin urban areas: 63Percentage of rural population withaccess to an improved water source in2012: 61 (46% in 2004)Percentage of the total population usingthe Internet: 18Main exports: mineral products, textilesand textile articles, natural or colouredstones, precious metals and jewellery

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into green products and services, such as solarand wind-power generation and high-endorganic food products.

Another sees Mongolia at the heart of adynamic economic area comprising NorthernChina and Eastern Russia, combined with anintegrated, open North Korea. In this scenario,Vladivostok is a thriving seaport benefittingfrom an opening of Arctic sea lanes, and thefree movement of goods and people acrossborders is commonplace.

There are signs that the government agreeson the need to change course and diversify. In 2012, the government established a new‘core’ Ministry of Environment and GreenDevelopment and, in mid-2014, it unveiled athree-month-long plan designed to boostinfrastructure, mining, manufacturing and thedevelopment of small and medium-sizedenterprises. Infrastructure spending proposalsincluded the building of a road to connect thelandlocked nation’s two neighbours, Russiaand China; the construction of thermal powerstations; and the development of twoeconomic free trade zones.

ManufacturingWhile noting that there are various routes todiversification, the United Nations Industrial

Development Organization (UNIDO) isencouraging the government to implementpolicies that will help develop a competitiveand high value-added manufacturing sector.A recent UNIDO report on Mongolia refersto historical and empirical evidence showingthat countries that produce and exportmanufactured products experience fasterlong-term growth and are eventually able todiversify into even more advanced industries.

Mongolia’s manufacturing sector is smalland accounted for only 6.2% of GDP in 2012.Of the total economically active populationof around one million people, only 48,000were employed in the manufacturing sector.The UNIDO report states that the smalloverall population limits the size of the

domestic market, and that the challenge isto identify those manufactured productsthat it is feasible to support initially, in thesense that they use local raw materials, canbe produced economically and compete ininternational markets.

UNIDO recommends an industrialstrategy based on two main pillars. First,steps should be taken to improve the qualityof manufactured products for specific nichemarkets. “The country could improve thequality of those products which requireunique Mongolian raw materials, design orprocesses. The establishment of amarketing structure and trade associationsis vital to promote traditional products ofMongolian origin. There is great potentialfor exports of high value-added industrialproducts based on cashmere, yak hair, sheepwool, camel hair and red meat.”

Second, UNIDO proposes the aggressivepromotion of Mongolian products ininternational markets, includingparticipation in specialized fairs andbranding. “Mongolian manufactures should be recognized for their quality, theirunique identity and by price differentiation,for all of which a coherent marketingstrategy is required.”

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Why is green growth important to Mongolia?Mongolia’s environment is relatively verypristine. We have a number of veryecologically important areas that are notonly important for Mongolia, but also forthe region, for the world. We have 17% ofour country already preserved as protectedareas and national parks, and also we have atraditional, nomadic, livestock herd, whichdirectly depends on pastures.

At the same time, especially in the lastfive to six years, our economy has beengrowing very fast, based on resourceextraction and mining. As the economy isgrowing fast, we have to be very careful,and because it is based pretty much onmining, which is a ‘brown’ industry, wehave to be especially careful to haveenvironmentally friendly growth. With allthe revenues from mining, our GrossDomestic Product has grown 10 timessince 1998. Also our budget is going up.There are planned investments in

infrastructure, energy and roads, and alsothere is a big migration to the cities.Large-scale urbanization is taking place,so we have to look at housing projects as well.

So, now that all these plans and projectsare starting, it is very important to havegreen elements from now on during theplanning and also at the start of theprojects, because the decisions that wemake now will impact our environmentalfootprint for the next 30-40 years. That’swhy it’s important to have green elementsin our decisions, and that why we arefighting for green development. What are some of the policies Mongoliahas put in place to pursue moresustainable growth?In 2012, we passed a package ofenvironmental legislation. We upgradedthe environmental rehabilitation (ofmining areas) to higher standards, and, forthe first time, we introduced the pollute-and-pay principle. So, for example, from2014 on, industries will have to start payingwater pollution fees. At the same time, weare introducing a number of elementswhere we are promoting and giving taxreductions and incentives for the use ofcleaner technologies and equipment. For example, there is a list of equipment and technologies that will have a zero tax on sales.

We also drafted a Green DevelopmentStrategy for the country. So, now that

Mongolia is growing very fast, we areaspiring to have more environmentallyfriendly and greener growth, especiallybecause mining is one of our majorindustries. Once the Green DevelopmentStrategy is approved by the Parliament, wewill have different sectors with a plan onhow to turn a ‘brown’-sector economy intoa more green economy.

We are also discussing energy-efficiencylegislation in the Parliament. We do alreadyhave a carbon tax. We are one of the mainexporters of coal in the region, so we have acoal export tax, and the revenues that comefrom of the coal export tax go to the CleanAir Fund. It has existed for the last fewyears, and it is spent on improving the airquality in the capital city and otherprovincial centres. How do you expect Global Green GrowthInstitute to help Mongolia?We are looking for knowledge, solutions,and the best technology choices.Knowledge is always power. It takes time to put knowledge and solutions together.Especially now we are trying to transit to a greener development strategy, it’s veryimportant to have this knowledge,experience and solutions. We are lookingfor the knowledge sharing. In the currentglobalized world, I think knowledge is oneof the top investments that anybody canmake, so we are looking for that.

Interview: SANJAASUREN OYUN, Minister of Environment and Green Development

Sanjaasuren Oyun tells the Global Green Growth Institute(GGGI)* about Mongolia’s future green economic development.

*The GGGI is designed to be an open, globalplatform to support experimentation and collectivelearning by developing countries seeking to leapfrogthe resource-intensive and environmentallyunsustainable model of industrial developmentpioneered by advanced economies in an earlier era.

“We plan to turn a ‘brown’-sector economy more green”

SANJAASUREN OYUN was appointedMinister of Environment and GreenDevelopment in 2012. She has been amember of the Parliament ofMongolia since 1998, and is the chairof the Civil Will-Green Party. Sheserved as the Minister of ForeignAffairs between 2007 and 2008.

MongoliaCOUNTRYFEATURE


In June 2013, Mongolia became be thefirst country to join the United NationsPartnership for Action on Green Economy(PAGE), a major initiative to assist theglobal transition to a green economy. Theinitiative, between the UN EnvironmentProgramme, the UN IndustrialDevelopment Organization, the UNInstitute for Training and Research, andthe International Labour Organization is adirect response to the outcomedocument of the 2012 Rio+20conference.

The four UN agencies will provide acomprehensive suite of green economyservices that will enable countries totransform their national economicstructures to meet the growing demandsand challenges of the 21st century. Morespecifically, PAGE will build enablingconditions in participating countries byshifting investment and policies towardsthe creation of a new generation ofassets, such as clean technologies,resource-efficient infrastructure, well-functioning ecosystems, green skilledlabour and good governance. PAGE willinitially focus on seven pilot countriesand then expand to assist 30 countries by 2020.

Speaking at the NationalImplementation Workshop to Advance aGreen Economy and Green Developmentin Mongolia in Ulaanbaatar in May 2014,Sanjaasuren Oyun highlighted themomentum in Mongolia to advancegreen development referring, inparticular, to the Green DevelopmentStrategy, which she expected to beadopted by Parliament in June 2014.“Green economy and green developmentare not only the priority for the Ministryof Environment and Green Development,but are also becoming important forother ministries”, Minister Oyun stated,citing the construction of green andenergy-efficient buildings as an examplewhere the collaboration of government,the private sector and internationalpartners such as PAGE can advance green development.

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MakingIt42

NimaliChipsandFibreMill

In the latest of a series focusing onremarkable companies, Making Itprofiles Nimali Gunawardana, thefounder of a Sri Lankan businessprocessing coconut husks.

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Nimali Gunawardana is one of seven children from anunderprivileged family in rural Sri Lanka. On leavingschool, she took a job as a machine operator in agarment factory but she was determined to beindependent and soon took steps to open her ownbusiness.

In 2010, with money saved from her wages and loansfrom friends, she brought the lease for a coir-producingfactory. (Coir is the fibrous material found between thehard, internal shell and the outer coat of a coconut. It canbe used to make products such as floor mats, brushesand mattresses, and in upholstery padding and sacking.The global trade volume for value-added coir products isvalued at about US$140m annually, with India’s share atabout US$70m and Sri Lanka’s in the region of US$60m.)

Gunawardana soon realized she did not have thebusiness knowledge or experience to run a company.More seriously, she was unaware that the business shehad acquired had a number of outstanding loans. Afterjust three months, she had to close the company, losingaround US$2,300.

First business failed“Once that business failed, I was determined to engagein the same sector and to develop my skills,” saidGunawardana, but no bank would lend her money tostart a new business. She was advised to contact YouthBusiness Sri Lanka (YBSL), a business supportorganization that is part of Youth Business International,a global network of independent non-profit initiativeshelping young people start and grow their own business.

YBSL gave her a week's business training, set her upwith her own mentor, and provided a modest loan ofUS$780, which she used to buy much-neededmachinery. In August 2012, her new business, NimaliChips and Fibre Mill, was launched. YBSL helped herfind a regular buyer for her product, and later provided arecommendation for a commercial bank loan, enablingher to buy a truck for her business – a step whichsignificantly improved her credit rating.

Parental supportIn an interview with the BBC, Gunawardana said, “WhenI first started out in business, my parents did not agreewith my choice, mainly because I am a girl. In rural partsof Sri Lanka, women like me are very rare. But now myparents are proud, and they give me their support, asdoes my husband.”

Nimali Chips and Fibre Mill, based in the southernrural district of Ambalantota, turns discarded coconuthusks into three useful materials – coir, coir pith andhusk chips. The coir is sold to a company in the SriLankan city of Galle which uses it to produce bed

mattresses. The coir pith – also known as coco peat – isthe residue from the coir extraction and cleaningprocess. It is sold to another Sri Lankan company thatexports to Germany, the UK and Canada where it is usedfor horticultural and agricultural applications. The huskchips, made by crushing the hard part of coconut shells,are used as a growing material for plants, and also forwater filtration.

International awardWithin a year, the company employed 13 people – 11 women and two men, processed 15,000 coconuts aday and was on track to generate an annual turnover ofUS$39,000. Gunawardana was able to pay back the loansshe had borrowed from her friends. Such has been thesuccess of her new company that, in September 2013,Youth Business International (YBI) awarded the 25-year-old the global title of Start-up Entrepreneur ofthe Year 2013.

A YBI spokesperson said, “A woman running thistype of business in Sri Lanka is pioneering. She is abusinesswoman with a future…She has overcome manytraditional and gender barriers, and she has grasped thisbusiness opportunity with both hands and run with it.”

Gunawardana is now planning to expand thebusiness. She wants to start making products from whatshe produces, beginning with making coir into rope. In an interview with YBI she said, “I hope to establish astable enterprise. In two or three years, I hope to havemy own factory to manufacture coir mattresses andtwine. I also want to export chips directly to othercountries, without going through intermediaries.”

Youth entrepreneursAsked about youth entrepreneurship in Sri Lanka,Gunawardana voiced strong opinions. “State and non-state organizations should do more for youthentrepreneurs. If these organizations provide the type of assistance provided by Youth Business Internationalto youth entrepreneurs, youth entrepreneurship in Sri Lanka could be raised to a higher level. Counsellingservices, training programmes and competitions,exhibitions, workshops should be organized to empoweryouth entrepreneurs.”

And her advice to others hoping to follow her trail-blazing path?

“My advice to youth entrepreneurs is not to give up inthe face of difficulties and to make a determined effort tocontinue what they started. They should not hesitate toseek the advice of experienced businessmen. It is mybelief that there is nothing called failure and it is only aprocess that needs to be taken to the very end. There isnothing one cannot achieve in this state of mind.”

“I am happy that Ihave broken downthe traditionalbarriers a woman hasto face in society” –

Nimali Gunawardana,winner of the YouthBusiness InternationalStart-up Entrepreneurof the Year 2013.

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MakingIt44

POLICY BRIEF

by NANKI KAUR, Senior Researcher in theClimate Change Group at the InternationalInstitute for Environment and Development(IIED)

Progressive countries, including some ofthe world’s poorest, are acting to greentheir economies and build resilience toclimate change. There’s also a growingappetite for investment in these areas. In2012, governments and investors pouredan estimated US$359bn into projectstargeting low carbon and climate resilientdevelopment. But a closer look at thenumbers reveals three big gaps:� First, the sum invested to date is a tinyfraction of the trillions of dollars it will costto decarbonize the global economy andadapt to the impacts of climate change. Fordeveloping nations, this gap is especiallyworrisome. Rwanda, for instance, estimatesit faces a financing gap of approximatelyUS$100m per year over the next 20 years

for investments in climate resilience andgreen economy.� Second, private investments dominateclimate finance, accounting for 62% of thetotal. But most private finance bothoriginates and stays in developed countrieswhere investors are more comfortable withrisks. This means developing nations needto target international sources of publicfinance to fill their funding gaps.�Third, 94% of money invested in 2011targeted mitigation – primarily renewableenergy and energy efficiency. This trendhas significant implications for themajority of developing nations which havelow carbon emissions. They must insteadprioritize adaptation and will supportgreen economy initiatives only if theycontribute to development objectives.

The challenge for developing nations isthat the costs of making the transition toclimate resilient green economies will behuge, and the actions needed come with

very specific financing needs. On one hand,green economy initiatives have thepotential to bring returns on capitalinvestments and so can attract privatefinance. On the other, climate resilience isoften a public good, and would ordinarilyneed public finance in the form of grants.

Over the past year the IIED has workedwith seven countries – Bangladesh,Ethiopia, Kenya, Nepal, Rwanda, TheGambia and Zanzibar – to identify wayspublic sector actors can respond to thiscontext and the emerging appetite forinvestment in these areas. In March 2014,policymakers met in Addis Ababa andidentified the following three steps:

IntermediariesFirst, these countries have started torecognize the roles of a range ofintermediaries, such as multilateraldevelopment banks and national financialinstitutions, in mobilizing and disbursingclimate finance.

There is also an increasing trend towardsestablishing national climate change fundssuch as those set up in Bangladesh,Ethiopia and Rwanda. These support amore programmatic approach to climatefinance, drawing in funds from nationaland international sources and managingthe money to best effect.

Rwanda’s fund has been designed toevolve as different sources of finance andnew investment areas become viable. In the

How developingnations can closeclimate finance gaps

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POLICY BRIEF

short to medium term, the Ministry ofNatural Resources manages the fund tomobilize and disburse public sources offinance, while the Development Bank ofRwanda manages a credit facility toincentivize private sector investment. Ifinvestments into low-carbon, climateresilient development becomecommercially viable, the Fund has thescope to evolve and be managed as aventure capital fund over the long term.

Rwanda is unique in that it has adopted apioneering approach, because it foreseesbig shifts in the financial landscape and afuture in which purely private investmentswill dominate. It is using financialintermediaries to create a phased approachto managing climate finance.

InstrumentsSecond, countries are using a range ofeconomic and financial instruments totarget different investors and the specificinvestment needs of climate resilience anda green economy. For instance, Ethiopiaand Kenya are using economicinstruments such as power purchaseagreements and feed-in tariffs that aim tosecure and enhance the financial returnsfrom high-risk investments in renewableenergy.

Bangladesh and Ethiopia are usingfinancial instruments such as insuranceand guarantees to reduce the risk toinvestors. Public sector entities in all seven

climate resilience and green economygoals into planning and budgetary systemsin order to ensure the long-termsustainability of climate finance, and tomanage funds more effectively. Nepal’sclimate change budget code and Rwanda’son-budget approach to financedisbursement provide interestingexamples of how such systems can achievethis.

These evolving trends in the design ofintermediaries, economic and financialinstruments and financial planningsystems show how many developingnations are taking important steps toensure they are ready to receive, manageand disburse climate finance from bothpublic and private sources as they make thetransition to climate-resilient, greeneconomies. They are not just sittingwaiting for money to flow. They are settingup the systems and institutions that willcreate new money from old.

countries use grants and concessionalloans to finance investments in climateresilience. National financial institutionslike private banks and micro-financeinstitutions are also using capitalinstruments like debt and equity finance tounlock private capital.

Planning systemsThird, policymakers are focusingsignificantly on financial planning systems– especially institutional arrangements andbudget and planning systems. Every dollarneeds to generate several more. They arekeen to ensure that institutions withexisting capacity – especially absorptive andfinancial management capacity – take thelead in managing climate finance, toachieve investment outcomes that aregreater than the sum of their parts.Examples of such institutions include:� Ethiopia’s Ministry of Finance andEconomic Development which isresponsible for the financial managementof the country’s Climate Resilient GreenEconomy Facility� India has accredited its National Bankfor Agricultural and Rural Development asits implementing entity under theUNFCCC Adaptation Fund – making itresponsible for accessing and managingmultilateral sources of climate finance.

Policymakers are also keen to ensure thatinstitutions such as national planningcommissions should lead efforts tocoordinate action on climate change,especially funding decisions, as their‘bird’s-eye view’ of investment prioritiesacross sectors is advantageous. Thisenables them to allocate finance to acohesive investment portfolio that ensuresthe supported projects do not duplicateexisting activities within developmentplans. In Rwanda, a team from the Ministryof Finance supports the national climatechange fund’s technical team to do this.

Policymakers are keen to integrate

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By PETER RICHARDS, IPS – Inter Press Service

Ralph Gonsalves, the prime minister of St. Vincent and the Grenadines, says thepromises of money by the “biggest pollutersin the world” for small island developingstates (SIDS), like his, to adapt to climatechange are a mostly a “mirage”. But as chairof the 15-member Caribbean Community(CARICOM) grouping, Gonsalves will beplaying a lead role in getting the region tocoordinate a united front on climate finance.

“We agreed on the establishment of a taskforce on climate change and small islanddeveloping states to provide guidance toCaribbean climate change negotiators, theirministers and political leaders in order toensure the strategic positioning of theregion in the negotiations,” he told IPSfollowing a CARICOM summit inKingstown, St. Vincent, in March 2014.

Gonsalves said the region is now preparingfor two important meetings in September:the United Nations Climate Change Summitin New York and the Third United NationsSIDS International Meeting in Samoa.

Guyana’s President, Donald Ramotar, toldIPS that it was important for the leadersthemselves to get involved in thenegotiations and “to make our voices heardon this matter, because as you know we havebeen the least contributors to climatechange, but we are among the first to feelthe big effects.”

Ramotar said the tragedy that occurredwhen a slow moving low-level trough hit St.Vincent and the Grenadines, Dominica andSt. Lucia on Christmas Eve last year, killingmore than a dozen people and leavingdamages estimated at more than US$100m,

“is just the latest reminder how vulnerableour region is”.

The task force must now “find areaswhere CARICOM can agree on”, he said.“This is a critical decision by heads [ofstate] at a time when efforts are underwaythrough the UN to have a global climatechange agreement by the end of 2015.”

“We need to ensure that as a region, ourvoices are being heard on this importantissue, and not only from our technicalpeople, but from the collective politicalleadership in the region,” Ramotar said,stressing the need for a globally bindingagreement.

“We have to ensure that we push for aclimate change agreement by 2015 which isambitious in terms of emission reductiontargets and providing climate financing,”he added.

The communiqué that followed theCARICOM summit in March “lamentedthe fact that much of the promisedresources had not been forthcoming butemphasized the need for the CaribbeanCommunity Climate Change Centre(CCCCC) to work with member states inorder to have projects prepared to accessfinancing when it did become available.”

Guyana, for example, has been playing alead role with regards to climate change,

and priority projects on adaptation areoutlined within its Low CarbonDevelopment Strategy (LCDS), which seeksto address the effects of climate changewhile simultaneously encouragingeconomic development.

Gonsalves said that on the question ofadaptation, there is a whole menu ofinitiatives which have been establishedthrough discussions, technical reports andthe like. What is needed most now is themoney to pay for them.

“It is a lot a lot of money that is requiredso that is why…we have to work in acoordinated manner at the relevantinternational fora to see whether we couldidentify those areas where the money ismore easily available for us to touch.”

“You get governments, the big polluters,they make commitments of all sorts of

Caribbean to forge united fronton elusive climate finance

“The big polluters, they makecommitments of all sorts ofmonies but it is a mirage andthe closer you get to it, yourealize it is not there.” CARICOMChair, Ralph Gonsalves

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monies but it is a mirage and the closeryou get to it, you realize it is not there, itrecedes. That’s the real difficulty with thisand this is why we have to work better,harder on this because this is an exegeticalissue. It affects the very existence of ourcountries,” Gonsalves said.

Executive director of the CCCCC,Kenrick Leslie, said that waiting will onlymake solutions more costly.

“Climate change is here. You saw interms of the frequency of extreme weatherevents. Those are some of the indicatorsthat the climate is changing. But moreimportantly, people don’t realize that thesea level is rising at this time, at a rate offive millimetres per year. They might sayfive millimetres, what is that? But in 10years, five millimetres will become 50millimetres, and in terms of the English

system that’s two inches, in 30 years that issix inches. Now consider the sea levelrising a further six inches in Guyana orSuriname or Belize,” Leslie said.

“We need to have our political leadersbecome very knowledgeable about whatis being negotiated…Technical peoplecan negotiate at the technical level butthe final decisions are made at thepolitical level, and therefore if ourpolitical leaders are not cognisant withwhat is going on, then we will fail interms of getting what is needed for theadaptation that we have to make.” � IPS is an international communicationinstitution with a global news agency at itscore, raising the voices of the South and civilsociety on issues of development,globalization, human rights and theenvironment – www.ipsnews.net

MakingIt 47

Akelyira, Charles and Ndomo, Atieno – StructuralTransformation and the Challenge of FinancingAfrica’s Post-2015 Development Agenda

Alcorta, Ludovico; Naudé, Wim; and Szirmai, Adam –Pathways to Industrialization in the Twenty-FirstCentury: New Challenges and Emerging Paradigms

Bensoussan, Eytan; Ruparell, Radha; and Taliento, Lynn –Innovative development financing

Böhringer, Christoph; Carbone, Jared; and Rutherford,Thomas – The Strategic Value of Carbon Tariffs

Bretton Woods Project – Follow the money: the WorldBank Group and the use of financial intermediaries

Costanza, Robert and Kubiszewski, Ida (eds) – Creating aSustainable and Desirable Future: Insights from 45Global Thought Leaders

Dodds, Felix; Laguna-Celis, Jorge; and Thompson, Liz –From Rio+20 to a New Development Agenda: Building a Bridge to a Sustainable Future

Levi, Michael – By All Means Necessary: How China’sResource Quest is Changing the World

Nadkarni, Vidya and Noonan, Norma (eds) – EmergingPowers in a Comparative Perspective: The Political andEconomic Rise of the BRIC Countries

Najam, Adil and Thrasher, Rachel (eds) – The Future ofSouth-South Economic Relations

Stuenkel, Oliver – India-Brazil-South Africa DialogueForum (IBSA): The Rise of the Global South

UN Global Compact – UN-Business Partnerships: A Handbook

UNIDO – Business PartnershipsZadek, Simon – Financing the Green Economy

http://effectivecooperation.org – The Global Partnershipfor Effective Development Co-operation helps nations,business and organizations work better together toend poverty

http://partnerships.businessfightspoverty.org – The Partnerships Zone of Business Fights Poverty, the world’s largest network of business anddevelopment professionals

http://postgrowth.org – The Post Growth Institute is aninternational group exploring and inspiring paths toglobal prosperity that don’t rely on economic growth

www.brettonwoodsproject.org – The Bretton WoodsProject is a UK-based NGO that challenges the WorldBank and IMF and promotes alternative approaches

www.businesscalltoaction.org – Business Call to Actionchallenges companies to develop inclusive businessmodels that offer the potential for both commercialsuccess and development impact

www.oecd.org/dac – The OECD Development AssistanceCommittee (DAC) groups the world’s main donors,defining and monitoring global standards in key areasof development

www.unglobalcompact.org/Issues/Business_Partnerships– Global Compact’s UN-Business Partnerships

www.unido.org/businesspartnerships.html – UNIDO’sBusiness Partnership Programme harnesses theexpertise, know-how and resources of the privatesector to tackle important global industrialdevelopment issues.

www.un.org/esa/ffd – UN DESA Financing forDevelopment Office

MakingItIndustry for Development

FURTHER READING

FURTHER SURFING

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Partnerships and financing. Issue 16