Discussion Paper

Discussion Paper

Innovative Financing for Development: A New Model for Development Finance?

January 2012

Innovative Financing for Development: A New Model for Development Finance?

January 2012

Copyright ? January 2012 United Nations Development Programme Bureau for Development Policy One United Nations Plaza New York, NY 10017, USA E-mail: poverty.reduction@ Web site: poverty

Acknowledgements This Discussion Paper was written by Gail Hurley, Bureau for Development Policy, UNDP. Research assistance was provided by Sofia Palli, also of the Bureau for Development Policy, UNDP. The author would like to thank the following people for their guidance and comments in the drafting of this paper: Paul Ladd (UNDP), Anne-Marie Sloth Carlsen (UNDP), Yanchun Zhang (UNDP) and Pedro Martins (Overseas Development Institute).

Contact Information Gail Hurley, Poverty Group, Bureau for Development Policy, UNDP: gail.hurley@

Cover Image Kletr/

Disclaimer The views expressed in this publication are those of the authors and do not necessarily represent those of the institutions to which they are affiliated or the United Nations or their Member States, including UNDP.

Contents

List of Acronyms and Abbreviations

2

Abstract

3

1. Introduction

5

2. Innovative financing for development: what's it all about?

7

3. Major innovative financing for development initiatives

9

3.1 Taxes, dues or other obligatory charges on globalized activities

10

3.2 Frontloading and debt-based instruments

11

3.3 State guarantees, public-private incentives, insurance and other market-based mechanisms

14

4. Innovative financing for development: initiatives under discussion

17

4.1 Financial transactions taxes

17

4.2 Carbon taxes

19

4.3 Solidarity Tobacco Contribution

19

4.4 IMF's Special Drawing Rights

20

5. Innovative financing for development and the experience so far: key issues and considerations for the future

21

5.1 Have innovative financing for development initiatives generated additional resources for development? 22

5.2 Have innovative sources of development finance delivered concrete development results?

24

5.3 Which countries have benefited from innovative financing for development and why?

25

5.4 Have innovative financing for development initiatives delivered stable and predictable resources for

27

international development and climate/environment?

5.5 Have innovative financing initiatives strengthened country ownership of the development process?

29

5.6 Have innovative financing for development initiatives supported capacity development in beneficiary 31 countries?

5.7 Have innovative financing for development initiatives accentuated issues related to fragmentation and 33 coordination in international aid delivery?

5.8 Is innovative financing for development sustainable over the longer-term?

34

5.9 Can innovative financing for development be scaled up and/or initiatives replicated in other

36

development areas or regions?

6. Looking forward: the place of innovative finance in a changing development financing landscape

38

Notes

41

Annex: A Snapshot of the Pros and Cons of Different Approaches

44

Glossary: Major innovative financing for development initiatives

54

References

57

List of Acronyms and Abbreviations

ACTs AFD

AMC AMFm BTC CCRIF CDM CERs CTT DAC EC EU EU ETS FTT GAVI GNI HIPCs HSS IBRD

ICT IDA IFFIm IMF IRED

LDCs MDBs MDGs NGOs OBA ODA OECD

PES PIUs PPP SDRs StAR

Artemisinin-based Combination Therapies Agence Fran?aise de D?veloppement (French Development Agency) Advance Market Commitments Affordable Medicines Facility for Malaria Belgian Technical Cooperation Caribbean Catastrophe Risk Insurance Facility Clean Development Mechanism Certified Emissions Reductions Currency Transactions Tax Development Assistance Committee European Commission European Union European Union Emissions Trading Scheme Financial Transactions Tax Global Alliance for Vaccines and Immunisation Gross National Income Heavily Indebted Poor Countries Health System Strengthening International Bank for Reconstruction and Development Information and Communications Technology International Development Association International Finance Facility for Immunisation International Monetary Fund Initiative R?gionale pour l'Energie Durable (Regional Initiative for Sustainable Energy) Least Developed Countries Multilateral Development Banks Millennium Development Goals Non-Governmental Organizations Output-based Aid Official Development Assistance Organisation for Economic Cooperation and Development Payments for Ecosystem Services Parallel Project Implementation Units Public Private Partnerships Special Drawing Rights Stolen Asset Recovery Initiative

TB

Tuberculosis

UEMOA West African Economic and Monetary Union

UN

United Nations

UNDP United Nations Development Programme

UNESCO United Nations Educational, Scientific and Cultural Organization

UNEP United Nations Environment Programme

UNICEF United Nations Children's Fund

UNODC United Nations Office on Drugs and Crime

UN-REDD United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation

WB

World Bank

WHO

World Health Organization

WWF

World Wide Fund for Nature WWF

Abstract

Abstract

This Discussion Paper explores recent experiences with innovative sources of development finance in order to capture lessons learned for the more effective implementation of both current and future initiatives. We first look at what is understood by the term `innovative financing for development' since the term encompasses a heterogeneous mix of innovations both in fund-raising and in spending on the ground. We then summarise some of the major schemes implemented so far and outline how they work. The paper then reviews a number of proposals currently on the table for future innovative development finance schemes and examines the political dynamics associated with each. We then assess the record of innovative sources of development finance against nine key questions which serve as useful indicators of the added value and possible draw-backs of each instrument. These include questions such as: the extent to which initiatives have created additional financial flows for development, have supported country ownership of the development process, delivered predictable finance and supported concrete development results. Finally we explore the place of innovative financing for development in a changing development financing landscape. Specifically, we look at whether we are likely to see increased dependence on such mechanisms in the future and consider the possible benefits and risks associated with such a shift. The paper aims to provide some insights into the pros and cons of different approaches and, as such, make a useful contribution to international policy discussions over the design and implementation modalities of both current and future innovative sources of development finance.

Innovative Financing For Development: A New Model For Development Finance? 3

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download