15 June 2010

The Heads of State and Government of the EU will meet this Thursday 17 June for the European Council summit. Ahead of this Thursday’s summit, Eurodad has written an open letter (attached below) asking EU leaders to make development finance work for the world’s poorest countries. We invite you to send similar letters to your Heads of State and Government ahead of the 17 June summit.

This is particularly important since at the meeting EU leaders will decide on the EU joint position on the Millennium Development Goals (MDGs) that it will take to the UN General Assembly High-Level Plenary Meetings in New York in September 2010, building on the recently released conclusions of the Foreign Affairs Council of the European Union meeting in Luxembourg on 14^thJune. Below, Eurodad shows these conclusions to be insufficient in addressing key issues on development finance that works for the poor.

Council conclusions- turning a blind eye to crucial development finance reforms

The Foreign Affairs Council conclusions constitute the EU’s position on the Millennium Development Goals (MDGs) that it will take to the UN General Assembly High-Level Plenary Meetings in New York in September 2010. The ministerial agreement builds on the European Commission communications on “Getting the Millennium Development Goals back on track: a twelve point EU action plan” published in April this year. [1]  

In the midst of concerns over the impact of the global crisis on development finance, Eurodad welcomes the Council’s emphasis on the need for “the EU to take development objectives into account in non-development policies that are likely to affect developing countries.” In this regard, the Council’s ground-breaking support for “a more development-friendly international framework…to address harmful tax practices and tax evasion, (and to) increase domestic resources” is particularly encouraging.

However, the Council conclusions turn a blind eye to key issues on aid effectiveness, capital flight, developing country  debt and the reform of the International Financial Institutions,which are fundamental to supporting the world’s poorest countries recover from the crisis, and to putting reforms in to place that contribute effectively to achieving the MDGs.

Main highlights from the FAC Council conclusions:

Some steps in the right direction. The conclusions agree to:

• Take development objectives into account in non-development policies that are likely to affect developing countries, in accordance with its commitments on Policy Coherence for Development.
• Support a Country by Country reporting standard for Multi National Companies (MNCs) and an international framework for tax information exchange as a means to tackle tax evasion from developing countries, including the disclosure of beneficial ownership of legal structures.

What is sorely missing? The Conclusions fail to:

• Propose binding actions on how to get back on track in scaling-up aid, and delivering on the aid effectiveness commitments due in 2010. 
• Explicitly support the UN tax committee, and provide assertive proposals to address transfer mispricing practices from MNCs operating in developing countries.
• Provide lasting solutions to the developing country debt crisis, including on the need to establish a debt work out procedure to deal with developing country debt difficulties.
• Commit to in-depth reforms of the IFIs to ensure greater representation of developing countries and to make sure their finance contributes to effective and sustainable development.

(A full analysis of the FAC Council conclusions is attached)

Eurodad’s recommendations to EU leaders:

• Establish a binding framework of responsible finance standards, for both public and private financial flows to developing countries. It should include provisions for an independent and transparent debt work out procedure to address debt disputes in case of repayment difficulties or over the legitimacy of debt claims.
• Agree upon a clear set of binding measures to combat capital flight and tax evasion. These should include a country by country reporting standard for multinational companies. The EU should also play a leading role at the international level in combating transfer mispricing and in promoting a multilateral framework for automatic information exchange.
• Ensure that aid targets and aid effectiveness commitments are met by establishing binding national and EU legislation.Innovative sources are also needed to make development finance more stable, predictable and equitable.
• An in-depth reform of the International Financial Institutions to ensure greater voice and representation for developing countries and policy space to adopt alternative macroeconomic policies that accommodate growth and development oriented strategies. The EU should consolidate its representation at the Boards of the IFIs to free up space for developing countries and should also comply with its commitments to phase out economic policy conditionality as stated in the EU common position for the High Level Forum on aid effectiveness in Accra in 2008.

Send the attached letter asking your Head of State or Government to listen and act on the above recommendations!

Eurodad full analysis of FAC conclusions : Kb

Open letter to EU leaders : Kb

Source: http://www.eurodad.org/whatsnew/articles.aspx?id=4156