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Innovative Financing for Global Networks

Posted by Steve Waddell in Funding on May 11, 2010

New financing mechanisms for Global Action Networks (GANs) are being developed under the leadership of the Leading Group on Innovative Financing for Development. The Group’s work is already producing very significant funding for Stop TB, the Global Alliance for Vaccines and Immunization (GAVI), and the Global Fund to Fight AIDS, Tuberculosis and Malaria.

The Leading Group has a wider focus than GANs and health care. And although it has the word “development” in its name from when it was formed in 2006, it actually is evolving a much bigger agenda than that. The agenda is really around addressing globalization, the production of global public goods, and such objectives as the Millennium Development Goals (MDGs). The eight MDGs each focus on one issue, including poverty, gender equality, health and environmental sustainability.

Julien Meimon, Permanent Secretary of the Leading Group, explains that the goal is to generate “…flows that are stable, predictable and complementary to ODA (Overseas Development Assistance).” The financing is to come from beneficiaries of, and costs associated with, globalization, such as air travel, international financial flows, and CO2 emissions.

The Leading Group is a “coalition of the willing” to use George W. Bushes famous phrase. But this time, the US is so far absent and another 60 countries are committed. The Group itself, Julien stresses, is an informal umbrella structure that is producing formal and concrete initiatives. Julien is an employee of the French Foreign Ministry, and has a staff that ranges from three to 20, depending upon the needs. They are determined not to become an international bureaucracy themselves.

There are four mechanisms to date:

  1. State Guaranteed loans: The Leading Group spurred the formation of the International Finance Facility for Immunization (IFFIm).By the end of 2010 nations will guarantee close to €4 billion in 20 year bonds to undertake immunization projects. The Group also produced $1.5 billion in commitments by governments and foundations to fund partnerships with pharmaceutical companies to research neglected diseases and provide affordable distribution of the drugs to the poorest countries.
  2. Mandatory Contributions or Taxes: International air fare taxes are funding UNITAID to buy drugs and diagnostics and negotiate significant reductions in prices of pharmaceutical firms. In its first three years with 13 countries participating, the taxes raised $1.2 billion. Norway has applied a kerosene tax to fund UNITAID.
  3. Voluntary contributions: In January, 2010 voluntary contributions were promoted with most air ticket purchases; McKinsey estimates the voluntary contributions could produce another $1 billion annually.
  4. Market mechanisms: Germany allocates 10 percent of the revenue from carbon auctions to development.

These mechanisms fund existing formal organizations like the health GANs and generate formal organizations, like IFFIm and UNITAID to lead the activity.

Task Forces are investigating various other mechanisms. The biggest mechanism of all probably is yet to come. In June a Task Force will report the technical and juridical feasibility of taxing financial transactions. “The (Leading Group) countries have tasked experts to propose a menu of options for what tax or voluntary contribution should be promoted,” Julien explains.

A 2010 review pointed out: “there is a total flow of $777.5 trillion. With a minimal impact on transactions caused by the introduction of such a tax, a levy of 0.005% would guarantee approximately $33 billion for solidarity programs to combat hunger and extreme poverty.”1

The Leading Group arose from a report on mechanisms commissioned by French President in 2004 and a 2006 Paris Ministerial Conference. It is a type of GAN, bringing together 59 countries, various international institutions and non-governmental organizations. It is an “action research/learning” body. Meetings report back on experiments with application of the mechanisms to both share learning and promote their adoption by others. And they are also breaking the model of “development financing” in spite of their name, and moving to “global financing” for global public goods. For example, countries like Namibia, while net recipients, also apply the air tax and contribute to UNITAID.

The Permanent Secretariat is in Paris, but the Presidency rotates between countries every six months. Japan is taking the Presidency for a 2010 meeting that will be in Tokyo.

What type of mechanisms do you think should be promoted?

1 Pochmann, M. and G. R. Schutte. (2010). "A tax for globalisation based on solidarity."Retrieved April 28, 2010, 2010, http://www.leadinggroup.org/article540.html
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