The Halifax Initiative would like to thank John Foster, North-South Institute, for his help in developing these FAQs
Revised November 2007
Answers
How is development normally financed?
Northern and some southern countries provide a percentage of their gross national income towards official development assistance (ODA) or aid. In Canada, as among other donors, ODA also includes full bilateral debt cancellation and government support for refugees from developing countries in their first year in the donor country. For more on Canadian aid, go to http://www.ccic.ca/e/002/aid.shtml
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Why is an initiative on innovative financing necessary?
There are two principal reasons, as provided by President Chirac, in part, at the inaugural conference and backed-up by the Landau report (see below), for developing innovative mechanisms to finance development:
- Globalization has rapidly expanded wealth for some, but this wealth - the profits of globalization - remains largely untaxed, and largely unavailable to fund such global public objectives as the relief of poverty and disease.
- Flows of ODA are limited, often unpredictable (depending on national political and budget priorities and pressures) and despite pledges by a number of donors to increase their aid – illustrated clearly at the 2005 Gleneagles Summit of the Group of Eight - ODA has declined relatively since 2006.
Additional, predictable and sustainable revenues are needed to meet development goals.
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What are the origins of the innovative financing mechanism process?
In 2003, President Chirac of France commissioned a report by a group of experts headed by Jean-Pierre Landau – the working group on new international financial contributions. The report came out in December 2004 and made the case for establishing levies, coordinated internationally but implemented at a national level.
Before its release, on September 20, 2004, Presidents Chirac of France and Lula of Brazil made a joint declaration on action against hunger and poverty at the United Nations. They noted the need to find additional resources for financing development, beyond ODA, and noted the work done by the expert group mandated earlier. The Presidents made their declaration at the UN in an attempt to spur support from other countries. The French economics Minister later presented plans for an initiative to tax airline tickets for specific health objectives, at the United Nations.
In follow-up 79 countries endorsed a Declaration on Innovative Sources of Financing for Development adopted on September 14, 2005 at the United Nations in New York.
The process really got underway when Chirac opened, on February 28, 2006, the international conference on “Solidarity and Globalization: innovative financing for development and against pandemics.” The conference was held from February 28 to March 1 at ministerial level in Paris with participation by over 100 countries, 60 civil society organizations from the debt, finance, tax and AIDS service community, and such figures as United Nations Secretary General Kofi Annan and British Finance Minister Gordon Brown.
There have been follow-up meetings about every six months since on an expanding agenda.
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What is the leading group and how is it organized?
The Leading Group, or Leading Group on Solidarity Levies to Fund Development, which is moving discussions around innovative financing mechanisms forward, has its origins in the joint declaration on hunger and poverty made by Presidents Chirac and Lula at the United Nations in September 2004 [See above].
The Leading Group is an informal inter-governmental body, with a Presidency that rotates every six months. To date, France, Brazil, Norway, South Korea, and Senegal have all held the Presidency. The Leading Group pursues its workplan through periodic meetings, and through working groups and initiatives that result from these meetings. It is advised by an Expert Group of specialists in finance appointed by some of the participating governments.
Who are the members of the leading group?
There are now 54 country members of the Leading Group along with two observer countries (China and Japan). [ Back to Top ]
Why isn’t Canada a member?
This is a good question to keep asking the Departments of Finance, Foreign Affairs and the Canadian International Development Agency. Canada is a partner in the Advance Market Commitments initiative which has been reported to the Leading Group, but has not been represented at the official level. Inquiries have revealed that Canada does not believe in dedicated taxes, like the airlines levy.
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Is civil society involved?
In the four meetings of the Leading Group which have been held to date (France, Brazil, Norway, South Korea), NGOs have participated very freely. NGOs have also been commissioned to present research, for example, on the Currency Transaction Tax (The North-South Institute of Canada, and Stamp Out Poverty of the UK), and on South-North flows (Tax Justice Network) commissioned by the Government of Norway for the Oslo Second Plenary Meeting.
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Who has chaired the leading group?
France initiated the group, Brazil then took the chair followed by Norway, Republic of Korea, Senegal and Guinea. The chair will return to France in 2008-2009.
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Where will the next meeting be? Who’s taking over the Presidency of the Group?
Guinea (Conakry) is President of the Leading Group for the next six months (April - October 2008), to be followed by France. The next – Fifth Plenary Meeting – is expected in Conakry, Guinea in mid-October.
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What are some of the initiatives to come out of this process, and the individual presidencies?
- The airlines levy and UNITAID (implemented)
- International Finance Facility for Immunization (implemented)
- Combating tax havens and capital flight (working group)
- Currency transaction development levy (CTT) (studies, action pending)
- Innovative financing and the environment (studies)
- Advanced market commitments (AMC) on vaccine development (several countries, including Canada, implementing)
- Migrants’ remittances (studies)
- Digital solidarity initiative (implemented)
- Information on some of the agenda items can found at: http://www.innovativefinance-oslo/no, or by googling “groupe pilote” and following various links. See also our Links section]
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So what have some of the “implemented” measures achieved?
At the instigation of Brazil, Chile and France, 28 countries stated their intention to introduce a very low solidarity levy on airline tickets for passengers leaving their countries, or to use a similar mechanism, to finance the fight against major pandemics. Applied in eight countries with no measurable impact on air traffic, it has already raised $250 million in 2007 over and above conventional aid. Moreover, the contributions will be ensured over the long term. They are levied by each country, but coordinated at an international level, and primarily channelled to the international drug purchase facility, UNITAID.
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What do these initiatives seek to achieve?
As indicated by President Chirac at the inaugural conference in Paris, 2006, these initiatives seek to secure additional, predictable and sustainable resources for development – deemed essential given the relatively short-term, fluctuating and often unsustained flows of ODA.
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What else has been discussed?
The agenda really depends on national initiatives being brought forward, like the French/Brazilian initiative on the airlines levy.
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How does this process relate to the Monterrey Financing for Development process? How does it feed into Monterrey/Doha?
This issue is still in play. The Leading Group continues its meetings through 2008. The outcomes are recognized in the Secretary-General’s Report on FfD (2007). A number of countries are pressing for the innovative sources discussion to be included in the preparatory process for Doha, the follow-up to Monterrey. For example, a working group has been constituted under Norwegian leadership to deal with tax haven/capital flight issues, and the French government has initiated a Political Declaration to be issued later in 2007 regarding innovative sources.
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What can I do?
Perhaps the most useful thing to do, besides becoming informed, is to encourage Canadian official and CSO participation and involvement in the Leading Group. Secondly, help build Canadian support for innovative sources of financing, including support of the airlines levy and UNITAID and for a Currency Transactions Tax.
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