On Sustainable Development Finance

Posted on 26 March 2014
Full Text: 
On Sustainable Development Finance
Remarks delivered at the ICESDF Session
by Paul Quintos
IBON International
3 March 2014
Thank you co-chairs for this opportunity to share our views on Finance for Sustainable Development.  I am from IBON International, and a member of the NGO Major Group from the Philippines.
We all know that the financing requirements for sustainable development is enormous. But we also know the resources are out there.  Just 5% of the 45 trillion dollar wealth of the world’s “High Net Worth Individuals” is enough to cover the annual cost of a global social protection floor, climate change adaptation and mitigation combined.[1] 
And yet only a small portion, and a declining proportion, of available finance is being invested in the real economy, let alone in poverty eradication and environmental protection. Instead a growing proportion is being invested in speculative and ultimately destabilizing trading of financial assets.
And more resources have been flowing out of developing countries towards the advanced economies in terms of illicit and non-illicit capital flows, debt payments, profit remittances, and so on, compared to the so-called Official Development Assistance (ODA) from the North to the South. Clearly there is a need for fundamental changes in the international economic and financial system if we are to ensure the means for pursuing a sustainable future for all. 
First is to reverse the financial liberalization and deregulation that has been promoted by international financial institutions and adopted by governments over the last three decades.  Financial liberalization has allowed capital flows to move unrestricted across borders and has encouraged tax competition among countries. Tax rates are lowered for foreign investors in order to attract both portfolio and direct investment. This not only reduces the revenues available for public investment and social spending, it also pushes many developing countries to shift the tax burden from mobile capital to less mobile labor.  So financial liberalization and tax competition is exacerbating the fiscal crisis at the same time worsening inequality and social conditions of working peoples throughout the world.
Financial regulation needs to be strengthened including the use of capital controls to regulate cross-border capital movements.  Financial institutions should not be allowed to grow too big that their failure becomes a threat to the financial system.  Derivatives trading should be strictly regulated and the most risky speculative practices like credit default swaps and naked short selling banned.  Shadow banking should have strict reporting requirements and new financial products must go through clearance procedures.
There is a need to pursue international tax cooperation so that governments can coordinate national taxation regimes to ensure, for instance, minimum corporate tax rates and other measures designed to reverse the current “race to the bottom” in the area of taxation.  Tax cooperation should also deal with trade mispricing and other tactics used by multinational corporations to help them avoid paying taxes.
Illegitimate and onerous debts – which now saddle developing and developed economies alike – should be cancelled and an independent and fair public debt workout mechanism under the
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